Citigroup must pay $11.5 million over garbled stock ratings
Finra says the bank's ratings system was riddled with errors and cost clients money.
The Financial Industry Regulatory Authority fined and sanctioned Citigroup Global Markets $11.5 million on Thursday for displaying inaccurate research ratings for more than 1,800 public companies from 2011 to 2015 and for related supervisory violations.
Over that period, Citigroup Global Markets incorrectly displayed to its brokers, retail clients and supervisors inaccurate research ratings for more than 1,800 stocks, or more than 38% of those covered by the firm.
Citigroup’s ratings system was riddled with errors, according to a statement from Finra. “Because of errors in the electronic feed of ratings data that the firm provided to its clearing firm, [Citigroup Global Markets] either displayed the wrong rating for some covered securities, e.g. ‘buy’ instead of ‘sell’, displayed ratings for other securities that [the company] did not cover or failed to display ratings for securities that Citigroup Global Markets, in fact, did cover.
The snafus cost Citigroup clients money, according to Finra. The firm was fined $5.5 million in the matter and is required to pay at least $6 million in compensation to retail clients.
“As a result of the errors, Citigroup Global Markets’ brokers solicited thousands of transactions inconsistent with the firm’s actual ratings and negligently made inaccurate statements to customers about those ratings,” according to Finra.
A spokeswoman for Citigroup Global Markets, Laura London, in an email said: “We are pleased to have the matter resolved.”
As part of the settlement, Citigroup Global Markets, which reported the research issue to Finra, neither admitted or denied the charges.
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