Citi settles with Finra over alleged conflicts at its brokerage

Citigroup Inc., the third-biggest U.S. bank by assets, agreed to pay $725,000 over regulatory claims its brokerage unit failed to disclose conflicts of interest in research reports and analysts’ public appearances.

Citigroup received investment banking revenue from some companies covered in research reports it published from January 2007 through March 2010, the Financial Industry Regulatory Authority said in a statement today. Citigroup managed public securities offerings for some firms mentioned in the reports and had a 1 percent or greater stake in others, Finra said.

“Citigroup failed to make required conflict of interest disclosures, which prevented investors from being aware of potential biases in its research recommendation,” Finra Enforcement Chief Brad Bennett said in a statement. “Firms need to provide investors with full and accurate information so they will be able to take it into consideration before making an investment decision.”

Finra said the disclosures by the bank’s brokerage subsidiary, Citigroup Global Markets, were missed primarily due to technical deficiencies in Citigroup’s database for identifying and creating the disclosures. Citigroup, which didn’t admit or deny Finra’s claims, self-reported several of the deficiencies to the regulator and took remedial action to fix them, Finra said.

“We take our disclosure systems very seriously and began adopting enhancements to our procedures prior to the inquiry,” Citigroup spokeswoman Sophia Stewart said in an e-mailed statement. “We are pleased to have settled this matter with Finra.”
Bloomberg News–

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