By Dow Jones Business News, October 03, 2013, 09:57:00 AM EDT
By Saabira Chaudhuri
Citigroup Inc.( C ) on Thursday was fined $30 million by Massachusetts for misconduct by a research analyst who in
December provided confidential information about a major supplier of Apple Inc. ( AAPL ) iPhones.
A representative of Citigroup didn't immediately respond to a request for comment.
The fine was levied by the Secretary of the Commonwealth of Massachusetts William F. Galvin. Recipients of the
nonpublic information about the supplier--Hon Hai Precision Industry Co. Ltd. (2317.TW)--include SAC Capital, T. Rowe
Price, Citadel and GLG Partners according to the Secretary's office.
Citigroup Global Markets Inc., the bank's investment-banking arm, is also required to perform a three-year review of
its policies regarding the disclosure of confidential information.
"It seems that the concept that investors are to be presented with a level playing field when it comes to the product
of research analysts is a lesson that must be learned over and over again," Secretary Galvin said, "but it's important
that it should be taught as often as necessary."
According to the Secretary's office, Kevin Chang--a research analyst employed by a Taiwanese affiliate of Citigroup--
released unpublished research information to a hedge fund and institutional clients one day before publishing virtually
identical information to the public.
On Dec. 13, following the publication of a report cutting Hon Hai production numbers by the Macquarie Group, an
Australian competitor to Citi in covering Hon Hai, Mr. Chang was pressured by large hedge fund and institutional clients
for his research on Hon Hai, according to the Secretary's office.
In response, Mr. Chang released the information to at least three units of SAC as well as to other hedge fund and
institutional clients, said the Secretary's office. Mr. Chang then published his Hon Hai research on Dec. 14th, which
included virtually identical information to what he had given SAC and the others the previous day.
The Securities Division, alleges that the Hon Hai research report, "containing significant cuts in Apple iPhone
production numbers, would have a detrimental impact on Apple." The order also says that three Citi clients executed
sales of Apple stock between receiving the information and the publication of Mr. Chang's Hon Hai report.
This isn't the first time Citi has been slapped with a fine related to leaking confidential information. Citi was
fined $2 million last year for failing to supervise Internet Analyst Mark Mahaney and a junior analyst he oversaw after
the pair allegedly ran afoul of rules covering disclosures to the media about Facebook Inc.( FB ) and Google Inc. ( GOOG )
A representative of SAC didn't immediately respond to a request for comment.
Write to Saabira Chaudhuri at firstname.lastname@example.org
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