Citigroup Global Markets Inc. (CGMI) concluded an $11.5 million Settlement with the Financial Industry Regulatory Authority (FINRA) to settle charges of inaccurate research ratings of certain equity securities.
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As part of the deal with the Wall Street self regulator, CGMI recognized that it had mis-published its research ratings to customers on account statements, email alerts and its online portal between from February 2011 through December 2015.
The errors in the ratings feed that CGMI provided to its customers either dropped or showed wrong ratings for some covered securities or displayed ratings for other securities that the firm did not cover.
The mistakes affected the investment decisions based on CGMI’s ratings, and violated certain firm-managed portfolio guidelines.
Wall Street’s industry-funded watchdog was concerned that investors relied on CGMI’s credit ratings to be objective and accurate, and they naturally expected the company to audit its own published research ratings.
In concluding the filing, Finra said that that firm issued inaccurate statements regarding more than 19,000 research ratings. It also emailed more than 1,000 customer alerts with inaccurate ratings, and displayed wrong evaluations on online portals available to customers.
The agreement requires CGMI to pay $5.5 million to the watchdog, and at least $6 million in compensation to the affected customers. The settlement also included non-monetary measures, agreed on with the FINRA, designed to ensure the accuracy of future credit ratings the firm issues.
The group has agreed to settle, however it neither admitted nor denied the charges despite consenting with the order.
Susan Schroeder, FINRA Executive Vice President and Head of Enforcement, commented: “Member firms must reasonably ensure that the research rating information that they display and on which they rely to supervise business activities is complete and correct. The display and use of incomplete and inaccurate research ratings can have widespread, adverse consequences to customers. Even when such inaccuracies are caused by technology problems, firms should react quickly to address those errors.”
