Citi Knew It Was Lying To Customers, Didn’t Care To Stop

After all, it wasn’t misleading any really important clients.
Author:
Updated:
Original:

Buy, sell, what’s the difference? For Citigroup’s small brokerage clients over a period of four years, the difference amounted to at least $6 million, specifically because Citi told them to buy stocks its analysts were decidedly in favor of selling, and vice-versa. This discrepancy came to light in-house in 2011, but it wasn’t until some idiot sent a broker whose platform was showing him the wrong ratings a printed research reported indicating the right ones in 2015 that the bank got around to fixing it.

citi-frown

The Financial Industry Regulatory Authority, which oversees brokers and money managers, said Citigroup agreed to pay $11.5 million in fines and compensatory damages to resolve claims that it gave mom-and-pop investors wrong or outdated information about its analysts’ recommendations, even after some officials in the business were told of the problem….

Some Citigroup employees knew as early as fall 2011 that customers were receiving incorrect ratings information on activity statements, but they did not understand why, according to the authority.

Notably, this glitch was conspicuously absent from platforms used by Citi’s institutional clients, a fact that probably would have cost Corbat & co. substantially more than $11.5 million had they meant to be screwing over the little guy.

The problem affected individual investors, but not Citigroup’s institutional investors, like pension funds and other big asset managers, which also sometimes rely on the bank’s research to devise their investment strategies…. There is no indication Citigroup intended to give its institutional clients an advantage over smaller investors.

Citigroup Fined for Showing Customers Wrong Stock Ratings [NYT]
FINRA Sanctions Citigroup Global Markets Inc. $11.5 Million for Displaying Inaccurate Research Ratings [press release]

Related