More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
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.