Citigroup Gets Hammered By Regulators (Again)

Once again, Citigroup Global Markets gets hammered by FINRA for research related problems. The entire release from FINRA's website is cut and pasted below. According to FINRA, Citigroup repeatedly failed to disclose potential conflicts in interest in their research reports in 2007 through 2010. These are extremely serious allegations, especially since Citigroup Global Markets in April of 2003 in a settlement with the SEC agreed to pay $150 million as disgorgement and an additional $150 million in penalties for very similar conduct. Citigroup apparently failed to learn its lesson despite a massive previous fine, a slew of FINRA arbitration claims and lawsuits and a horrible PR debacle. Some firms apparently never learn.

FINRA Fines Citigroup Global Markets $725,000 for Failure to Disclose Conflicts of Interest in Research Reports

WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Citigroup Global Markets, Inc. $725,000 for failing to disclose certain conflicts of interest in its research reports and research analysts' public appearances.

Citigroup failed to disclose potential conflicts of interest inherent in their business relationships in certain research reports it published from January 2007 through March 2010. Citigroup and/or its affiliates managed or co-managed public securities offerings, received investment banking or other revenue from, made a market in the securities of and/or had a 1 percent or greater beneficial ownership in covered companies, and did not make these required disclosures in certain research reports. In addition, Citigroup research analysts failed to disclose these same potential conflicts of interest in connection with public appearances in which covered companies were mentioned.

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, "Citigroup failed to make required conflict of interest disclosures which prevented investors from being aware of potential biases in its research recommendations. Firms need to provide investors with full and accurate information so they will be able to take it into consideration before making an investment decision."

FINRA found that Citigroup failed to disclose the required information because the database it used to identify and create the disclosures was inaccurate and/or incomplete due primarily to technical deficiencies. In addition, Citigroup failed to have reasonable supervisory procedures in place to ensure that the firm was populating its research reports with required disclosures.

In concluding this settlement, the firm neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

FINRA's investigation was conducted by Jeanne Elmadany under the supervision of Susan Light, Enforcement Chief Counsel.