Despite numerous red flags alerting the firm to ratings inaccuracies for several securities, CGMI failed to correct the inaccurately displayed ratings in a timely fashion. The firm also failed to conduct testing reasonably designed to verify the accuracy of research ratings data that it used and distributed.
Brokers and employees reported accuracy issues with regard to research on a number of occasions, Finra found. But even when staff “escalated” their complaints “the firm failed to take appropriate action” and “failed to recognize that the issue was part of a much larger problem,” the regulator said.
CGMI discovered the scope of the inaccurate ratings issues in December 2015 as a result of a broker who reported that he could not reconcile ratings displayed on the firm’s portal with CGMI’s actual research reports, Finra stated.
With average annual revenues of $8 billion, CGMI employs nearly 7,500 brokers in 700 branches and has excess net capital of $8.48 billion.
In settling this matter, CGMI neither admitted nor denied the charges, but consented to the entry of Finra's findings.