Citigroup Global Markets Inc. Sanctioned to Pay $11.5 Million for Displaying Inaccurate Research Ratings
Posted on Tuesday, January 16th, 2018 at 8:39 pm
Erez Law is currently investigating Citigroup Global Markets Inc. financial advisors across the country following a FINRA sanction for displaying inaccurate research ratings.
In December 2017, FINRA fined Citigroup Global Markets Inc. $5.5 million and required the firm to pay at least $6 million in compensation to retail customers for displaying inaccurate research ratings for numerous equity securities and for related supervisory violations.
FINRA found that between February 2011 through December 2015, Citigroup Global Markets Inc. displayed to its brokers, retail customers and supervisors inaccurate research ratings for more than 1,800 equity securities, representing more than 38 percent of those covered by the firm. According to FINRA’s findings, Citigroup Global Markets Inc. had errors in the electronic feed of ratings data that the firm provided to its clearing firm, the firm either displayed the wrong rating for some covered securities (such as stating buy instead of sell), displayed ratings for other securities that CGMI did not cover or failed to display ratings for securities that CGMI rated.
“An equity research rating reflects a firm’s opinion of the future performance of a public security,” FINRA said. “CGMI disseminated its research ratings to customers on account statements, email alerts and an online portal. CGMI brokers and supervisors, meanwhile, relied on internally disseminated research ratings to make security recommendations and to monitor customer transactions and portfolio allocations.”
These errors caused Citigroup Global Markets Inc. to solicit thousands of transactions inconsistent with the firm’s actual ratings and negligently made inaccurate statements to customers about those ratings. Additionally, Citigroup Global Markets Inc. supervisors failed to detect and prevent a substantial number of transactions that were actually inconsistent with CGMI research or portfolio guidelines. Namely, the firm prohibited portfolios from containing equity securities the firm had rated “sell.”
FINRA also found that Citigroup Global Markets Inc. made materially inaccurate statements and omissions regarding more than 19,000 research ratings on customer account statements, sent more than 1,000 customer email alerts with inaccurate ratings, and displayed inaccurate ratings on online portals available to customers.
FINRA also found that Citigroup Global Markets Inc. failed to timely correct the inaccurately displayed ratings, despite red flags alerting the firm to ratings inaccuracies. However, Citigroup Global Markets Inc.’s research reports and ratings appearing in those reports were factually accurate and did not contain these errors.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Citigroup Global Markets Inc. may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.