Citigroup Inc. (NYSE: C) will pay at least $11.5 million in fines and restitution due to Financial Industry Regulatory Authority claims that it displayed the wrong research ratings on more than 1,800 stocks.
On Thursday, FINRA stated that Citigroup Global Markets Inc. showed incorrect ratings — such as “buy” instead of “sell” — to brokers, customers and supervisors on 38 percent of the equities covered by its research department from February 2011 to December 2015. FINRA fined the company $5.5 million over the charges and ordered it to pay at least $6 million to customers.
The errors stemmed from problems with an electronic data feed, and Citigroup failed to timely fix the wrongly displayed ratings despite “numerous” red flags. The bank’s actual research reports and ratings were not affected. “The display and use of incomplete and inaccurate research ratings can have widespread, adverse consequences to customers,” FINRA enforcement chief Susan Schroeder said in a statement. “Firms should react quickly to address those errors.”
As a result, brokers solicited thousands of transactions and negligently made inaccurate statements premised on wrong ratings, and many customers ended up owning stocks with “sell” ratings despite a prohibition on such ownership, FINRA said.