The Financial Industry Regulatory Authority (FINRA) announced Tuesday that it had fined Citigroup Global Markets $3.5 million for providing inaccurate mortgage performance information, supervisory failures and other violations in connection with subprime residential mortgage-backed securitizations (RMBS).
“Citigroup posted data for its RMBS deals that it should have known was inaccurate, and even after they learned that the data was inaccurate, Citigroup did not correct the problem until years later,” said Brad Bennett, FINRA’s executive vice president and chief of enforcement, in a statement. “Investors use this data to inform their decisions and in this case, for over six years, investors potentially used faulty data to assess the value of the RMBS.”
In settling this matter, Citigroup neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
Issuers of RMBS are required to disclose historical performance information for past securitizations that contain mortgage loans similar to those in the RMBS being offered to investors, according to FINRA. Historical data on mortgage performance is material to investors in assessing the value of RMBS and in determining whether future returns may be disrupted by mortgage holders’ failures to make loan payments.