Citigroup Global Markets Fined $11 Million for Faulty Ratings

Photo: Reuters

The mistakes affected investment decisions ‎that were based on CGMI’s ratings‎.


Citigroup Global Markets Inc. (CGMI) concluded an $11.5 million settlement ‎with the Financial Industry Regulatory Authority (FINRA) to settle charges of ‎inaccurate research ratings of certain equity securities. ‎

As part of the deal with the Wall Street self-regulator, CGMI recognized ‎that it had mis-published its research ratings to customers on account ‎statements, email alerts and its online portal between from February 2011 ‎through December 2015.‎

The errors in the ratings feed that CGMI provided to its customers either ‎dropped or showed wrong ratings for some covered securities or ‎displayed ratings for other securities that the firm did not cover.‎

The mistakes affected the investment decisions based on CGMI’s ratings and violated certain firm-managed portfolio guidelines.‎

Wall Street’s industry-funded watchdog was concerned that investors relied on CGMI’s credit ratings to be objective and accurate, and ‎they naturally expected the company to audit its own published research ‎ratings.‎

In concluding the filing, Finra said that that firm issued ‎inaccurate statements regarding more than 19,000 research ‎ratings. It also emailed more than 1,000 customer alerts with inaccurate ‎ratings and displayed wrong evaluations ‎on online portals available to ‎customers.‎

The agreement requires CGMI to pay $5.5 million to the watchdog, and at ‎least $6 million in compensation to the affected customers. The settlement ‎also included non-monetary measures, agreed on with the FINRA, designed ‎to ensure the accuracy of future credit ratings the firm issues.‎

The group has agreed to settle, however, it neither admitted ‎nor denied the charges despite consenting with the order.‎

Susan Schroeder, FINRA Executive Vice President and Head of ‎Enforcement, commented: “Member firms must reasonably ensure that the research ‎rating information that they display and on which they rely to supervise ‎business activities is complete and correct. The display and use of ‎incomplete and inaccurate research ratings can have widespread, adverse ‎consequences to customers. Even when such inaccuracies are caused by ‎technology problems, firms should react quickly to address those errors.”‎

Regulation ( Institutional FX 

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