Citigroup Global Markets to pay $1.5M fine to settle FINRA matter
Citigroup Global Markets Inc has agreed to pay a fine of $1,500,000, under the terms of a settlement with the Financial Industry Regulatory Authority (FINRA).
Since at least January 1, 2014 through the present, the firm violated Rule 200(f) of Regulation SHO and FINRA Rule 2010 by improperly including securities positions of non-broker-dealer affiliates in two of its aggregation units when calculating the net positions of the aggregation units.
Since at least 2014 to present, the firm has included accounts of non-broker-dealer affiliates in two of its AGUs. One of the AGUs included six accounts of two non-broker- dealer affiliates, and the other AGU included approximately 6,700 accounts of 15 non- broker-dealer affiliates.
The firm’s inclusion of the securities positions of non-broker-dealer affiliates in its AGUs affected the calculation of the AGUs’ net position for order marking purposes. Rather than separately calculating the net position of the firm accounts within the AGU and the net position of each affiliate, as required by Regulation SHO, the firm marked all sell orders based upon the net position of all accounts in the AGU. As a result, the firm did not accurately calculate the net positions of, or assess long and short sales by, two of its AGUs.
Therefore, the firm violated Regulation SHO Rule 200(t) and FINRA Rule 2010.
By late 2015, the firm became aware that the inclusion of non-broker-dealer affiliates was not permissible under Rule 200(f). Nonetheless, the firm did not begin the process of removing its non-broker dealer affiliates from the AGUs until 2021. The firm failed to take reasonable steps to timely act upon known Rule 200(f) deficiencies.
Therefore, the firm violated FINRA Rules 3110 and 2010.
On top of the fine, Citi has agreed to a censure.