Citigroup fined $15 million for analyst supervisory failures

Failing to supervise research analysts and their handling of material non-public information at issue, Finra says

Nov 24, 2014 @ 11:59 am

By Bloomberg News

Citigroup Inc. (C), the third-biggest U.S. bank, was fined $15 million by the Financial Industry Regulatory Authority for failing to supervise research analysts and their handling of material non-public information.

The lender didn't adequately protect against “potential selective dissemination of non-public research to clients and sales and trading staff” from January 2005 to February 2014, Finra said Monday in a statement. New York-based Citigroup issued roughly 100 warnings about analyst communications with clients and sales and trading staff and when it found violations, it took too long to discipline staff or didn't do enough, the industry-funded regulator said.

“Citigroup did not enforce the boundaries of permissible communications to ensure that its analysts did not provide certain clients with improper access to non-public research information,” Cameron Funkhouser, executive vice president of Finra's Office of Fraud Detection and Market Intelligence, said in the statement.

At least seven banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., may be asked to pay a total of $50 million in fines as part of an agreement with Finra, people with knowledge of the matter said earlier this month, following claims analysts inflated estimates to win business for their firms. Bank of America Corp., Credit Suisse Group AG, Deutsche Bank AG and Wells Fargo & Co. also may face fines, the people said.


In 2003, Citigroup agreed to pay $400 million to settle charges that its analysts published misleading stock research to win investment-banking business. It was the largest penalty among 10 firms that agreed to settle.

From 2011 to 2013, Citigroup didn't prohibit analysts from helping companies prepare for so-called road show presentations, and in 2011 an analyst helped two firms prepare such materials, Finra said in Monday's statement. Citigroup analysts also provided stock picks at idea dinners hosted by the bank that in some cases differed from their published research, according to Finra.

An analyst in Taiwan also selectively shared information related to Apple Inc. with some clients, the regulator said. The bank was fined $30 million by Massachusetts in October 2013 over that incident.

Citigroup consented to Finra's findings without admitting or denying the charges, according to the statement.

“We are pleased to have resolved and put this matter behind us,” Sophia Stewart, a Citigroup spokeswoman, said in an e-mailed statement. “Citi takes its regulatory compliance obligations seriously, and we believe that we have strong procedures and controls in place to address the issues that Finra has raised.”


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