Citigroup Subsidiary Fined $2.9 Million by SEC Over Recordkeeping Failures

The Securities and Exchange Commission (SEC) has imposed a $2.9 million fine on Citigroup subsidiary, Citigroup Global Markets, as part of a settlement to address alleged recordkeeping failures spanning over a decade. The settlement includes payment of the civil penalty, a cease and desist order against further violations, and an official censure, according to an official press release by the SEC.

The SEC's allegations stem from a period extending from 2009 to May 2019, during which Citigroup Global Markets supposedly utilized an unverified and unsubstantiated approach to calculate and document indirect expenses associated with its underwriting activities.

The SEC's order states that Citigroup Global Markets had no understanding of the rationale behind its chosen method for computing indirect expenses during this timeframe. This included employing fixed percentages of underwriting fees to establish indirect expenses per deal, implementing expense caps, and employing "allocation grids" to distribute total indirect expenses across specific categories. The company used this unverified method for mandatory general ledger reporting.

Furthermore, the SEC claimed that Citigroup Global Markets failed to conduct any form of review or verification to ensure the reasonableness of its method for calculating indirect expenses.

In response to these allegations, the SEC pointed out that in May 2019, Citigroup Global Markets had voluntarily revised its approach to computing indirect expenses linked to its underwriting business.

Citigroup declined to comment on the matter, while also agreeing to the terms of the settlement without either admitting or denying the findings outlined by the SEC.

By fLEXI tEAM