FINRA Fines Citigroup $1.85 Mln For Violations In Customer Transactions

By RTT News, 
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(RTTNews.com) - The Financial Industry Regulatory Authority (FINRA) on Tuesday slapped a fine of $1.85 million on financial services giant Citigroup, Inc.'s ( C ) Citigroup Global Markets, Inc. unit for customer transactions violations. Citigroup has also been asked to pay an additional amount of $638,000 in restitution, plus interest, to the affected customers.

"Citigroup lacked the necessary systems and supervision to ensure that it provided customers with the executions they deserved and, as a result, customers were receiving inferior prices for more than three years," said Thomas Gira, FINRA Executive Vice President and Head of Market Regulation

In concluding this settlement, Citigroup neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

New York-based Citigroup is charged by FINRA of failing to execute about 22,000 customer transactions at the best price on non-convertible preferred securities over more than three years between January 2008 and May 2011. FINRA said the unit also had unsatisfactory supervisory procedures.

FINRA noted that one of Citigroup's trading desks used manual pricing for non-convertible preferred securities that led to customers being provided with prices that were inferior to the national best bid and offer or NBBO, on more than 14,800 transactions.

FINRA also found that Citigroup's proprietary BondsDirect order execution system failed to provide the best prices in more than 7,200 transactions as it used a faulty pricing logic that only incorporated the primary listing exchange's quotation for each of those transactions.

Further, the bank was seen having deficient supervisory systems and written supervisory procedures that led to best execution and supervisory violations in the pricing of non-convertible preferred securities transactions.

Citigroup also failed to perform any supervisory review of customer transactions in order to ensure compliance with the firm's best execution obligations even after receiving several inquiry letters from FINRA staff.

"FINRA will continue to pursue firms that neglect their duty of best execution," Gira added.

C closed Tuesday's regular trading session at $52.13, up $0.50 or 0.97% on a volume of 18.39 million shares.

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