The Financial Industry Regulatory Authority (Finra) has fined Citigroup Global Markets Inc. $725,000 for failing to disclose conflicts of interest in both its research reports and in public appearances made by its research analysts, officials announced today.
According to Finra, Citigroup failed to disclose potential conflicts of interest inherent in its business relationships in certain research reports it published from January 2007 to March 2010.
Citigroup 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, Finra says.
Finra also claims that Citigroup failed to disclose the required information because the database it used to identify and create the disclosures was inaccurate or incomplete due to technical deficiencies. In addition, Finra charges that Citigroup failed to have reasonable supervisory procedures in place to ensure that the firm was populating its research reports with required disclosures.
Finra also says Citigroup research analysts failed to disclose these same potential conflicts of interest in connection with public appearances in which covered companies were mentioned.
In concluding this settlement, the firm neither admitted nor denied the charges, but consented to the entry of Finra's findings.
"Citigroup failed to make required conflict-of-interest disclosures which prevented investors from being aware of potential biases in its research recommendations," said Brad Bennett, executive vice president and chief of enforcement for Finra, the independent regulator for securities firms doing business in the U.S."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."
-Jim McConville