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Citigroup Fined $1.85M by FINRA for Bad Pricing & Negligence

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Citigroup Global Markets Inc., a unit of Citigroup Inc. (C) was recently fined by the Financial Industry Regulatory Authority (:FINRA) for failure to give customers the best possible prices and deficient supervisory procedures. Apart from paying a $1.85 million fine, Citigroup has to compensate affected investors with an amount of $638,000, plus interest.

The latest fine pertains to the company’s failure in providing the best possible purchase or sale prices in about 22,000 customer transactions. As per FINRA, such malfunctioning resulted from supervisory deficiencies for the period Jan 2008 to May 2011.


FINRA clarified that despite getting repetitive inquiry letters, Citigroup lacked due diligence in providing best possible prices in certain customers transactions related to non-convertible preferred securities. According to FINRA, use of manual pricing for non-convertible preferred securities by one of Citigroup’s trading desks, provided inferior prices to the national best bid and offer (:NBBO) for around 14,800 transactions.

Further, FINRA notified more than 7,200 customer transactions had prices inferior to the NBBO due to the faulty pricing logic by Citigroup's proprietary BondsDirect order execution system. Therefore, such flawed process included only the primary listing exchange's quotation for the transactions which led to inferior prices.

Though Citigroup neither accepted nor rejected the charges, it has agreed to co-operate with the regulatory authority.

Similar Issues

In Jun 2012, FINRA penalized Merrill Lynch by $2.8 million for supervisory negligence which resulted in nearly 95,000 customers being overcharged with unnecessary fees and failure to provide certain required trade notices. Other Wall Street biggies penalized by FINRA for various rule violations include The Goldman Sachs Group, Inc. (GS), Barclays PLC (BCS), Morgan Stanley and Wells Fargo & Company (WFC).


The regulatory scenario following the financial crisis in the U.S has tightened, with litigation issues heavily weighing against Citigroup’s performance. Nevertheless, the stringent regulations prioritize investors’ security, thereby considerably reducing the chances of any financial fallout going forward.

Citigroup currently carries a Zacks Rank #3 (Hold).

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