Citigroup Fined $15M |for Supervision Failures

(CN) - Citigroup has been fined $15 million by the Financial Industry Regulatory Authority for failing to adequately supervise its analysts' interactions with the bank's clients and trading staff.

The authority said it found that between January 2005 and February 2014, Citigroup failed to meet its supervisory obligations regarding the potential selective dissemination of non-public research to clients and sales and trading staff.

During this period, Citigroup issued roughly 100 internal warnings concerning communications by equity research analysts. However, the authority said, when Citigroup detected violations involving selective dissemination and client communications, there were lengthy delays in disciplining the guilty parties.

And even when it did punish analysts, Citigroup's disciplinary measures lacked the teeth to deter repeat violations of the bank's policies.

In one example, the authority says Citigroup hosted "idea dinners" for institutional clients at which some of the bank's equity research analysts discussed stock tips that differed from their published research.

"Despite the risk of improper communications at these events, Citigroup did not adequately monitor analyst communications or provide analysts with adequate guidance concerning the boundaries of permissible communications," the authority said.

In another example, investigators found that an analyst employed by a Citigroup affiliate in Taiwan selectively disseminated research information concerning Apple Inc. to certain clients, which was then selectively disseminated to additional clients by a Citigroup equity sales employee.

The authority also said it found that in 2011, a Citigroup senior equity research analyst assisted two companies in preparing presentations for investment banking road shows. Between 2011 and 2013, Citigroup did not expressly prohibit equity research analysts from assisting issuers in the preparation of road show presentation materials.

Citigroup agreed to settle the case without admitting or denying the charges.

In a statement Citigroup said, "We have strong procedures and controls in place to address the issues that FINRA has raised in this matter, and we are continually working to improve those procedures and controls going forward."

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit