More On Legal & Compliancefrom The Advisor's Professional Library
- Where Are We Headed? The ultimate compliance goal is to help ensure that everyone associated with an advisory firm acts ethically at all times. Advisors and RIAs should do the right thing, even when regulators are not looking over their shoulders.
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
FINRA announced Wednesday that it has fined Citigroup Global Markets $725,000 for failure to disclose conflicts of interest in its research reports and research analysts' public appearances.
Brad Bennett (left), FINRA executive vice president and chief of enforcement, said in a statement, "Citigroup failed to make required conflict of interest disclosures which prevented investors from being aware of potential biases in its research recommendations. Firms need to provide investors with full and accurate information so they will be able to take it into consideration before making an investment decision."
FINRA said that Citigroup had failed to disclose conflicts of interest inherent in business relationships in some research reports that were published between January 2007 and March 2010. Among the conflicts were the receipt of investment banking or other revenue from covered companies; the management or co-management of public securities offerings by Citigroup and/or its affiliates; the making of a market in securities of or a 1% or greater beneficial ownership in covered companies; and a lack of disclosure of these circumstances in certain research reports.
Research analysts from Citigroup also failed to disclose these conflicts of interest during public appearances in which they mentioned covered companies.
FINRA also found that Citigroup failed to disclose the required information because the database it used to identify and create the disclosures was inaccurate and/or incomplete due primarily to technical deficiencies. In addition, Citigroup failed to have reasonable supervisory procedures in place to ensure that the firm was populating its research reports with required disclosures.
The firm neither admitted nor denied FINRA's findings, but consented to their entry.