SERVING CLIENTS NATIONWIDE

Citigroup Fined $1.85 Million, Ordered to Pay $638,000 Restitution for Non-Convertible Preferred Securities Violations

FINRA fined Citigroup Global Markets Inc. $1.85 million and ordered the firm to pay $638,000 in restitution for best execution and supervisory failures in over 22,000 customer transactions involving non-convertible preferred securities. FINRA also cited Citigroup for supervisory deficiencies it says contributed to the non-convertible preferred securities violations that occurred from January 2008 and May 2011.

FINRA Case #2009018738901

Investigators found that Citigroup failed to appropriately incorporate National Best Bid and Offer (NBBO) methodology in its manual pricing technique for non-convertible preferred securities. By failing to do so, FINRA found that Citigroup priced over 14,800 customer transactions at a level inferior to the NBBO and additionally priced over 7,200 transactions inferior to the NBBO because of a faulty pricing logic associated with the firm's proprietary BondsDirect order execution system.

The investigation states that Citigroup missed out on better prices for each non-convertible preferred security because the firm failed to assess each individual security's trades on multiple exchanges, instead only considering its primary listing exchange.

Further analysis led FINRA to conclude that Citigroup's supervisory system, including its written supervisory procedures (WSPs) for best execution in non-convertible preferred securities, was deficient.

The regulator accused Citigroup of failing to perform any review of non-convertible preferred securities customer transactions executed on the BondsDirect or manual trading desk system to ensure compliance, even after being prodded for information regarding compliance checks by FINRA staff.

The $1,850,000 fine imposed on Citigroup is comprised of a $1.4 million fine for best execution violations and a $450,000 penalty for supervision violations. The $638,000 in restitution is meant to cover customers adversely affected by the 22,000+ transactions associated with the aforementioned violations.

If you have invested with Citigroup Global Markets, Inc or with any firm whose supervisory or systematic pricing violations, such as failure to conduct adequate due diligence or failing to consider factors that could produce favorable pricing levels, in non-convertible preferred or any other securities has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.

Categories