FINRA Fines Citigroup $15 Million

FINRA has fined Citigroup Inc. $15 million for failing to properly supervise research analysts. According to FINRA, Citigroup analysts provided select clients with non-public opinions about stocks at “idea dinners.” In addition to violating rules against providing non-public information, certain of the opinions shared with the clients differed the opinions contained in publicly distributed research reports about the stocks. This form of securities fraud is prohibited by securities laws and regulatory rules. Citigroup apparently fostered this environment by encouraging its analysts to host so-called “idea dinners” with clients.

This news is astonishing considering Citigroup’s history of similar fines. Massachusetts securities regulators reportedly fined the firm $30 million in 2013 after an analyst in Taiwan selectively shared information related to Apple Inc. with some clients. And about a decade ago 10 investment banks, including Citigroup, paid a combined $1.4 billion in fines relating to improper analyst research practices. Citigroup alone paid $400 million, more than any other bank. One of the main aspects of the prior analyst debacle was that investment banks were publishing misleading stock research reports to win investment-banking business. DKR lawyers have represented a number of investors in FINRA arbitration claims over the years involving allegations that Citigroup or Citi’s Smith Barney analysts had engaged in misconduct.

At least seven banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc., Credit Suisse, Wells Fargo, and Deutsche Bank, reportedly may be asked to pay a total of $50 million in FINRA fines to resolve claims that analysts inflated estimates to win business for their firms.

Oftentimes this type of analyst fraud can benefit large institutional investors at the expense of small retail investors. If you have lost money in a Citigroup Global Markets Inc. or Citi International Financial Services LLC account, contact a Dimond Kaplan & Rothstein, P.A. securities arbitration lawyer to discuss your rights.

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