FINRA Fines Citigroup Global Markets $1.85M Following Supervisory Violations

The Financial Industry Regulatory Authority (FINRA) has levied a $1.85 million fine against Citigroup Global Markets Inc., which is now also responsible for paying $638,000 in restitution, plus interest, to select clients, according to a FINRA statement.

US-based FINRA is the largest nationwide independent regulator and deals with a variety of asset classes, focusing on investor protection, fraud and complementary compliance services in the securities business.

The regulator’s most notable edicts were public warnings against the riskiness of Bitcoin and cyber security vulnerabilities, earlier this year.

22,000 Clients Affected

Its newest action pits Citigroup Global Markets against its clientele, in which determined Citigroup Global Markets failed to provide its optimal Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term services to nearly 22,000 customer transactions, entailing non-convertible preferred securities.

Furthermore, Citigroup Global Markets was also found to have been suffering from a variety of supervisory shortcomings for a period of at least three years, which helped contribute to this inefficiency. Consequently, Citigroup Global Markets has been slapped with a $1.85 million fine, though FINRA has also ordered more than $638,000 in restitution, coupled with interest.

"FINRA will continue to pursue firms that neglect their duty of best execution. Citigroup lacked the necessary systems and supervision to ensure that it provided customers with the executions they deserved and, as a result, customers were receiving inferior prices for more than three years,” noted Thomas Gira, Executive Vice President and Head of Market Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term at FINRA, in a recent statement on the fine.

According to the FINRA statement, “In any customer transaction, a firm or its registered persons must use reasonable diligence to ensure that the purchase or sale price to the customer is as favorable as possible under current market conditions.”

NBBO-Induced Violations

Indeed, Citigroup Global Markets has instead opted to employ a manual pricing methodology with its trading desks, failing to properly institute the National Best Bid and Offer (NBBO) for its non-convertible securities.

This in turn led to the incorrect pricing of nearly 15,000 Citigroup customer transactions, relative to the NBBO. Moreover, Citigroup’s BondDirect system did not utilize proper pricing logic, which led to inferior pricing for over 7,000 customers.

Finally, FINRA also unearthed evidence that Citigroup’s supervisory system is outdated and deficient, citing an absence of reviews in customer transactions across non-convertible preferred securities, despite FINRA inquiry letters.

Citigroup’s official stance was neither admittance nor denial, the group has rather abided by the charges levied by FINRA and is expected to consent in due course.