(UPDATES with statement from Citigroup, 5th paragraph)
DOW JONES NEWSWIRES
The Financial Industry Regulatory Authority slapped Citigroup
Inc.'s (C) global-markets unit with a $2 million fine for a range
of trade-reporting violations, including publishing flawed
quotations, adding to a host of black marks that have stained the
financial-services giant in recent months.
Separately, Finra said Comerica Inc.'s (CMA) securities
operation was censured, fined $750,000 and agreed to repurchase
auction-rate securities from customers that were subject to
auctions that were not successful as of Sept. 16. The securities
regulator found Citigroup failed to properly monitor certain
trading systems as the market opened on June 17, 2005, a
quadruple-witching Friday when stock and stock-index options and
futures all expire.
Finra said Citigroup's "system failures" led to "the erroneous
publication" of about 6,800 non-bona fide transactions in more than
170 securities. That indirectly caused other firms to execute
transactions at prices unrelated to the market value of the
securities, forcing the firms to seek cancellation of more than
1,400 trades.
Finra also found Citigroup didn't report about 6 million orders
to Finra's Order Audit Trail System, between Aug. 1, 1999 and July
10, 2006. The regulator also found that from July 2002 through
September 2006, Citigroup inaccurately reported or failed to report
over 300,000 transactions to Finra's Trade Reporting and Compliance
Engine and inaccurately reported or failed to report more than
480,000 transactions to the Municipal Securities Rulemaking
Board.
Citigroup neither admitted nor denied the charges but consented
to entry of the findings. In a statement, it said it has taken
"remedial steps to prevent a recurrence of the systems issues" and
is "pleased to have resolved these matters."
The settlement comes as Citigroup grapples with a tumbling stock
price amid slumping credit and other losses that have forced the
financial giant to turn to the federal government three times for
help. The stock continued its recent gains Tuesday, rising 6.4% to
$2.48 in recent trading. The stock has more than doubled since
bottoming out on March 5, but it is still down over 60% this
year.
Meanwhile, without admitting or denying the findings Comerica
consented to the sanctions and the entry of findings that it "used
advertising and marketing materials with customers and prospective
customers that were not fair and balanced, and did not provide a
sound basis for evaluating the facts in regard to ARS
purchases."
Numerous banking giants have made settlements with various state
and federal investigators regarding allegations that they misled
investors in the freeze-up of the ARS market, agreeing to buy back
billions of dollars' worth of the securities.
Comerica shares were up 4.5% at $18.36. It is down 7.4% this
year.
-By Mike Barris, Dow Jones Newswires; 201-938-5658;
mike.barris@dowjones.com