Citigroup Inc has been charged of conducting misleading research and accorded ratings on its basis to more than 1800 stocks which resulted in a large number of investors purchasing those shares which otherwise they would never have purchased. The US regulatory authority said that the lender will need to pay at least $11.5 million for resolution, settlement and fines for the charges.
Those research errors happened between February 2011 and December 2015, and the number of stocks that were involved accounted for over 38 percent of the total equity securities that are researched and covered by the New York-based bank. The group has been ordered to pay a minimum of $6 million as compensation for the errors to investors in addition to $5.5 million as fines by the Financial Industry Regulatory Authority of the U.S.
The wrongdoing has neither been accepted or denied by Citigroup. The FINRA however said that the actions of the bank to report the issue off the ratings problem to the authorities and its decision to compensate the customers were indicative that the bank was cooperating with the regulatory authorities.
In some instances, the bank would show ratings for firms that it did not cover, or provided no ratings at all to customers while at other times, the bank would display the wrong ratings like “buy” when it should have suggested “sale” to the customers, brokers and supervisors. the regulator said.
And these wrong ratings formed the basis of a large number of brokers who solicited to thousands of their customer for transactions and issued statements that were made negligently. The FINRA said that as a result of such wrong research and ratings by the bank, a large number of customers had inadvertently purchased a number of shares and equities that had “sell” ratings and a a prohibition on the owning of such shares.
An electronic data feed was behind the errors of the bank making faulty research findings, the FINRA said. and despite the existence of a “numerous” red flags, Citigroup had been unable to fix the faulty ratings that were displayed within a reasonable period of time that could have prevented such large scale faulty purchase. There was no impact however on the actual research reports and ratings of the bank.
“The display and use of incomplete and inaccurate research ratings can have widespread, adverse consequences to customers,” FINRA enforcement chief Susan Schroeder said in a statement. “Firms should react quickly to address those errors.”
The bank was pleased to resolve the matter, said Citigroup spokeswoman Danielle Romero-Apsilos.
The bank at the moment has taken up a strategy of increasing financing to hedge funds, recruiting senior bankers, enhancing trading technology and furthering its equities business globally and it at this juncture that the sanctions have been made.
This is not the first time that the group has been embroiled in its stock ratings. On the charges of issuing “fraudulent and misleading” research reports for aiding Citigroup to acquire fundraising and M&A business from big corporate clients, a former star telecoms analyst - Jack Grubman, was served a life ban in 2003 from the securities industry.
(Source:www.reuters.com & www.ft.com)
Those research errors happened between February 2011 and December 2015, and the number of stocks that were involved accounted for over 38 percent of the total equity securities that are researched and covered by the New York-based bank. The group has been ordered to pay a minimum of $6 million as compensation for the errors to investors in addition to $5.5 million as fines by the Financial Industry Regulatory Authority of the U.S.
The wrongdoing has neither been accepted or denied by Citigroup. The FINRA however said that the actions of the bank to report the issue off the ratings problem to the authorities and its decision to compensate the customers were indicative that the bank was cooperating with the regulatory authorities.
In some instances, the bank would show ratings for firms that it did not cover, or provided no ratings at all to customers while at other times, the bank would display the wrong ratings like “buy” when it should have suggested “sale” to the customers, brokers and supervisors. the regulator said.
And these wrong ratings formed the basis of a large number of brokers who solicited to thousands of their customer for transactions and issued statements that were made negligently. The FINRA said that as a result of such wrong research and ratings by the bank, a large number of customers had inadvertently purchased a number of shares and equities that had “sell” ratings and a a prohibition on the owning of such shares.
An electronic data feed was behind the errors of the bank making faulty research findings, the FINRA said. and despite the existence of a “numerous” red flags, Citigroup had been unable to fix the faulty ratings that were displayed within a reasonable period of time that could have prevented such large scale faulty purchase. There was no impact however on the actual research reports and ratings of the bank.
“The display and use of incomplete and inaccurate research ratings can have widespread, adverse consequences to customers,” FINRA enforcement chief Susan Schroeder said in a statement. “Firms should react quickly to address those errors.”
The bank was pleased to resolve the matter, said Citigroup spokeswoman Danielle Romero-Apsilos.
The bank at the moment has taken up a strategy of increasing financing to hedge funds, recruiting senior bankers, enhancing trading technology and furthering its equities business globally and it at this juncture that the sanctions have been made.
This is not the first time that the group has been embroiled in its stock ratings. On the charges of issuing “fraudulent and misleading” research reports for aiding Citigroup to acquire fundraising and M&A business from big corporate clients, a former star telecoms analyst - Jack Grubman, was served a life ban in 2003 from the securities industry.
(Source:www.reuters.com & www.ft.com)
