Michael Mahaney, a senior technology analyst with Citigroup Global Markets Inc., has reportedly been fired for not adequately supervising a junior analyst during the Facebook IPO quiet period.
Citigroup, part of the underwriting syndicate for the Facebook offering in May, was slapped with a $2 million fine today by the office of Massachusetts securities regulator William Galvin over the incident.
The consent order issued by Mr. Galvin's office charged the company with failing to supervise its research analysts adequately. The regulator claims that the junior analyst sent e-mails to friends who worked at technology news website TechCrunch.com giving details about Mr. Mahaney's views on Facebook. Those views included “investment risks” and “investment positives.”
Underwriters are not permitted to release written research on businesses going public until 40 days after the initial public offering.
“It is essential in these times of rapid and diffuse means of communication that financial institutions be vigilant to ensure that the rules on IPOs are observed by all their personnel so that the integrity of the process is maintained,” Mr. Galvin said in a statement. “This penalty should serve as a warning to the industry as a whole.”
Citigroup admitted the facts set forth in the consent order but neither admitted nor denied the allegations. “We are pleased to have this matter resolved,” Citigroup spokeswoman Sophia Stewart said in a statement. “We take our internal policies and procedures very seriously and have taken the appropriate actions.”
A call to Citigroup for further comment was not immediately returned.
The unnamed junior analyst was fired in September, according to the consent order. Mr. Mahaney also was found to have improperly shared information about YouTube revenue estimates with a “French reporter” in April. It is unclear when Mr. Mahaney was fired.
The Massachusetts regulator is not finished with the Facebook IPO. Brian McNiff, a spokesman for Mr. Galvin's office, said that three other banks — Morgan Stanley, The Goldman Sachs Group Inc. and JPMorgan Chase & Co. —also have been subpoenaed for information around the offering.
“The investigation is ongoing,” Mr. McNiff said.