FINRA says that Citigroup Inc. subsidiary Citi International Financial Services LLC must pay over $1.2M in restitution, fines, and interest over alleged excessive markdowns and markups on agency and corporate bond transactions and supervisory violations. The financial firm must also pay $648,000 in restitution and interest to over 3,600 clients for the alleged violations. By settling, Citi International is not denying or admitting to the allegations.
According to FINRA, considering the state of the markets at the time, the expense of making the transactions happen, and the value of services that were provided, from July ’07 through September ’10 Citi International made clients pay too much (up to over 10%) on agency/corporate bond markups and markdowns. (Brokerages usually make clients that buy a bond pay a premium above the price that they themselves paid to obtain the bond. This is called a “markup.”) Also, from April ’09 until June ’10, the SRO contends that Citi International did not put into practice reasonable due diligence in the sale or purchase of corporate bonds so that customers could pay the most favorable price possible.
The SRO says that during the time periods noted, the financial firm’s supervisory system for fixed income transactions had certain deficiencies related to a number of factors, including the evaluation of markups/markdowns under 5% and a pricing grid formulated on the bonds’ par value rather than their actual value. Citi International will now also have to modify its supervisory procedures over these matters.
In the wake of its order against Citi International, FINRA Market Regulation Executive Vice-President Thomas Gira noted that the SRO is determined to make sure that clients who sell and buy securities are given fair prices. He said that the prices that Citi International charged were not within the standards that were appropriate for fair pricing in debt transactions.
If you believe that you were the victim of securities misconduct or fraud, please contact our stockbroker fraud law firm right away. We represent both institutional and individual investors that have sustained losses because of inadequate supervision, misrepresentations and omissions, overconcentration, unsuitability, failure to execute trades, churning, breach of contract, breach of promise, negligence, breach of fiduciary duty, margin account abuse, unauthorized trading, registration violations and other types of adviser/broker misconduct.
Before deciding to work with a brokerage firm that is registered with FINRA, you can always check to see if they have a disciplinary record by using FINRA’s BrokerCheck. Last year, 14.2 million reviews of the records of financial firms and brokers were conducted on BrokerCheck.
Read the Letter of Acceptance, Waiver, and Consent
Citigroup Fined for Bond Markup, The Wall Street Journal, March 19, 2012
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