The Financial Industry Regulatory Authority (FINRA) has fined Citigroup Global Markets $15m as it failed to supervise communications between its equity research analysts and its clients and Citigroup sales and trading staff properly.
Citigroup also allowed one of its analysts to participate indirectly in two road shows promoting IPOs to investors.
In 2011, a Citigroup senior equity research analyst assisted two companies in preparing presentations for investment banking road shows. Equity research analysts were also not prohibited from assisting issuers in the preparation of road show presentation materials between 2011 and 2013.
Citigroup failed to meet its obligations regarding the potential selective dissemination of non-public research to clients and sales and trading staff from January 2005 to February 2014 and issued about 100 internal warnings concerning communications by equity research analysts.
FINRA executive vice president and chief of enforcement Brad Bennett said: "The frequent interactions between Citigroup analysts and clients at events like ‘idea dinners’ created a heightened risk that views inconsistent with research would selectively be disclosed to clients.
"Citigroup failed to effectively police these risks."
FINRA Office of Fraud Detection and Market Intelligence executive vice president Cameron Funkhouser said: "In this case, Citigroup did not enforce the boundaries of permissible communications to ensure that its analysts did not provide certain clients with improper access to non-public research information.
"Investment banking and research departments are guardians of material, non-public information and have the responsibility to maintain strict control and protection of that information."
The Department of Enforcement and the Office of Fraud Detection and Market Intelligence conducted FINRA’s investigation.