FINRA Slaps $475,000 Fine on CitiGroup Global Markets

The Financial Industry Regulatory Authority (FINRA) announced that it has fined CitiGroup Global Markets Inc. (CGMI) $475,000 for failing to disclose the potential conflict of interest in approximately 16,850 equity research reports over the period of five years.

In an official document released by FINRA, the authority mentioned that from November 2012 to November 2017, CGMI excluded around 24,800 disclosures required in more than 16,850 equity research reports as the global markets arm of CitiGroup failed to indicate that it was either a manager or a co-manager of a public offering of equity securities for the companies covered in the reports.

The regulatory authority also mentioned that the total omissions had an impact on around 4.43% of the published reports during the mentioned time period. FINRA termed this negligence as a failure to establish and maintain a supervisory system by CGMI.

“In 2017, during a Compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term review, the firm discovered that the third-party service provider’s data relating to the manager/co-manager disclosure was sometimes inaccurate. During testing performed following the identification of the issue, the firm discovered that the vendor data on occasion did not identify the correct entities involved in a relevant transaction, and on other occasions failed to document a relevant transaction altogether. Those errors caused CGMI’s systems to not disclose that it was a manager or co-manager of an equity public offering as required by NASD and FINRA rules,” the official document states.

Credit for Cooperation

Despite the fact that CGMI did not disclose important information regarding the potential conflict of interest, the regulatory authority gave credit to CGMI for its extraordinary cooperation to resolve the matter. “Enforcement recognizes CGMI’s extraordinary cooperation for discovering the omitted disclosures during a planned compliance review, initiating an internal review prior to detection or intervention by FINRA or another regulator, and self-reporting directly to FINRA staff in addition to promptly correcting the cause of the omitted disclosures to prevent further omissions,” FINRA's document mentioned.