Citigroup fined $725,000 for Research Violations


New York, NY – Earlier this week, FINRA announced that it had fined Citigroup Global Markets $725,000 for failure to disclose various conflicts of interest in its research analysts’ public appearances and in Citi’s equity research reports published between January 2007 and March 2010.

FINRA said in a statement that Citi had “failed to make required conflict of interest disclosures which prevented investors from being aware of potential biases in its research recommendations.”

Besides other disclosure problems, Citi apparently did not disclose its role as a manager or co-manager of a related public offering in 8% of the 80,000 reports it issued annually; it neglected to report investment banking revenue it had received in 330 research reports; and it didn’t disclose its beneficial ownership in about 1,800 companies its analysts covered.

FINRA noted that it believes Citigroup failed to disclose the required information in part because the database it used to identify and create the disclosures was inaccurate or incomplete.  FINRA took into account a number of factors in determining Citi’s penalty, including the fact that several of the disclosure problems were self-reported.

The recent fine is not the first time that Citigroup has run afoul of the regulators for problems with its research disclosures.  Previously, Citi was fined $350,000 for lapses committed between 2004 and 2006.  Consequently, Citi has attempted to address these issues in the past.  In fact, Citi conducted two internal reviews of its research disclosure systems, one in conjunction with the previous $350,000 fine, and again in 2010, after continuing problems with internal systems and data from outside affiliates.

In concluding the settlement with FINRA, Citigroup neither admitted nor denied the charges, but agreed to accept FINRA’s censure over the matter.




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