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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Monday, March 19, 2012

Citi Fines Citigroup Sub for Excessive Markups and Markdowns on Bond Transactions

FINRA announced today that it fined Citi International Financial Services LLC, a subsidiary of Citigroup, Inc., $600,000 and ordered more than $648,000 in restitution and interest to more than 3,600 customers for charging excessive markups and markdowns on corporate and agency bond transactions, and for related supervisory violations.

FINRA found that from July 2007 through September 2010, Citi International charged excessive corporate and agency bond markups and markdowns. The markups and markdowns ranged from 2.73 percent to over 10 percent, and were excessive given market conditions, the cost of executing the transactions and the value of the services rendered to the customers, among other factors. In addition, from April 2009 through June 2009, Citi International failed to use reasonable diligence to buy or sell corporate bonds so that the resulting price to its customers was as favorable as possible under prevailing market conditions. 

During the relevant period, Citi International's supervisory system regarding fixed income transactions contained significant deficiencies regarding, among other things, the review of markups and markdowns below 5 percent and utilization of a pricing grid for markups and markdowns that was based on the par value of the bonds, instead of the actual value of the bonds. Citi International was also ordered to revise its written supervisory procedures regarding supervisory review of markups and markdowns, and best execution in fixed income transactions with its customers.

In concluding this settlement, Citi International neither admitted nor denied the charges.

http://lawprofessors.typepad.com/securities/2012/03/citi-fines-citigroup-sub-for-excessive-markups-and-markdowns-on-bond-transactions.html

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