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Citigroup for years gave small investors inaccurate information about whether the bank’s research analysts recommended buying or selling certain stocks, a Wall Street regulator said Thursday.
The Financial Industry Regulatory Authority, which oversees brokers and money managers, said Citigroup agreed to pay $11.5 million in fines and compensatory damages to resolve claims that it gave mom-and-pop investors wrong or outdated information about its analysts’ recommendations, even after some officials in the business were told of the problem.
The industry watchdog said Citigroup misrepresented its analysts’ views of more than 1,800 stocks, telling small investors some had “buy” ratings when in fact they were rated “sell,” and vice versa. In other cases, individual investors got ratings information for stocks that Citigroup analysts had stopped covering altogether.
The problem, which began in 2011, persisted until the end of 2015, according to the financial authority, when a broker reported being unable to reconcile ratings displayed on a Citigroup portal with those printed in its research reports. Some Citigroup employees knew as early as fall 2011 that customers were receiving incorrect ratings information on activity statements, but they did not understand why, according to the authority.
“We are pleased to have the matter resolved,” said Citigroup spokeswoman, Laura London.
The problem affected individual investors, but not Citigroup’s institutional investors, like pension funds and other big asset managers, which also sometimes rely on the bank’s research to devise their investment strategies. As a result, the bank’s retail customers appear to have been put at a disadvantage relative to the institutional clients.
“The inaccuracies in the research ratings feed had widespread, adverse consequences,” the watchdog said in a statement, adding that Citigroup’s brokers “solicited thousands of transactions inconsistent with the firm’s actual ratings and negligently made inaccurate statements to customers about those ratings.”