WASHINGTON (dpa-AFX) - The Financial Industry Regulatory Authority or FINRA announced that it has fined Citigroup Global Markets Inc. $15 million for failing to adequately supervise communications between its equity research analysts and its clients and Citigroup sales and trading staff, and for permitting one of its analysts to participate indirectly in two road shows promoting IPOs to investors.
FINRA found that from January 2005 to February 2014, Citigroup (C)failed to meet its supervisory obligations regarding the potential selective dissemination of non-public research to clients and sales and trading staff. During this period, Citigroup issued approximately 100 internal warnings concerning communications by equity research analysts.
However, when Citigroup detected violations involving selective dissemination and client communications, there were lengthy delays before the firm disciplined the research analysts and the disciplinary measures lacked the severity necessary to deter repeat violations of Citigroup policies.
Previously, Citigroup research analysts had discussed stock picks, which, in some instances, were inconsistent with the analysts' published research. Despite the risk of improper communications at these events, Citigroup did not adequately monitor analyst communications or provide analysts with adequate guidance concerning the boundaries of permissible communications.
FINRA found that an analyst employed by a Citigroup affiliate in Taiwan selectively disseminated research information concerning Apple Inc. to certain clients, which was then selectively disseminated to additional clients by a Citigroup equity sales employee.
FINRA found that, in 2011, a Citigroup senior equity research analyst assisted two companies in preparing presentations for investment banking road shows. Between 2011 and 2013, Citigroup did not expressly prohibit equity research analysts from assisting issuers in the preparation of road show presentation materials.
In settling this matter, Citigroup neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
FINRA's investigation was conducted by the Department of Enforcement and the Office of Fraud Detection and Market Intelligence.
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