Securities News: Citigroup to Pay $7M Over Incomplete Blue Sheet Data, Cetera Fined $75K for Client Record Issue, and Raymond James Settles EB-5 Program Violations for $1.45M

Raymond James to Pay Vermont Almost $1.5M in Immigrant Visa Case
The Securities Division of the Vermont Department of Financial Regulation said that Raymond James & Associates (RJF) must pay $1.45M in penalties because one of its registered representaitves allowed investor money to be misused in a$350M development fraud involving the EB-5 program. The program lets rich foreign investors obtain permanent residency if they invest a certain amount in projects that help establish jobs for U.S. citizens.

Earlier, a Securities and Exchange Commission-appointed receiver sued Raymond James, which received wire transfers involving the scam beginning in 2008. The money was from investors who thought they were investing in a Vermont ski resort. One of the fraudsters, Ariel Quiro, is accused of borrowing against the Raymond James accounts and using nearly $2.5M of investors’ money to cover margin interest loans to the firm. Last month, Raymond James arrived at a $5.95M settlement with the Vermont Department of Financial Regulation over violations involving the ski resort. $4.5M of the money was for paying back investors.

Regarding this $1.45M fine, Vermont regulators said that it was a Raymond James representative who set up the brokerage and margin accounts involved in the alleged scam. The financial representative also failed to procure the proper documentation showing that Quiros was entitled to act for certain limited partnerships and let him authorize the transfer of $13M in limited partnership money to buy the ski resort even though written instructions directed otherwise.

Citigroup Admits Wrongdoing Over Blue Sheet Data
According to the SEC, for 15 years, Citigroup Global (C) markets provided the regulator with incomplete blue sheet data regarding trades that it executed. The coding error involved software that the firm used from 5/99 to 4/14 for processing the Commissions’ requests for the information, including data about trade times, prices, volume traded, and information identifying customers. As a result, Citigroup left out nearly 27,000 securities transactions in responses to over 2,300 blue sheet requests.

The SEC said that even after noticing the mistake, Citigroup did not tell the regulator and waited for several months after to notify the Commission. To settle the case, Citigroup has admitted wrongdoing and will pay a $7M penalty.

The SEC requests blue sheet data to help it examine trades during investigations. “Blue sheet” refers to the color of the forms that are sent to brokerage firms when making the data requests. Blue sheet data is now requested electronically.

Cetera Must Pay $75K Fine for Not Telling Customers About Account Record Changes
Cetera Investment Services must pay a $75K fine to settle allegation that it did not tell clients that changes were made to account records. The Financial Industry Regulatory said that from 10/08 through 11/13, customers did not get 57,881 notifications about client account record changes, including modifications to contact information and investment goals.

The issue was a computer code that stopped notices of account changes from being sent to customers who were no longer at the firm. A glitch caused the account notices to stop being sent to current Cetera customers. FINRA said that Cetera did not identify the computer error because it lacked the procedures to oversee proper notice generation and mailing.

Securities law requires firms to keep customer account records and tell them of any change. By settling, Cetera is not admitting to or denying the charges. Cetera Investment Services is a Cetera Financial Group Inc. subsidiary.

Enforcement: Raymond James Fined $1.45M in Vermont Immigrant Visa Case, ThinkAdvisor, July 22, 2016

Read the Order in the SEC’s Blue Sheet Data Case Against Citigroup (PDF)

Finra fines Cetera $75,000 for records snafu
, Investment News, July 26, 2016