[ by Howard Haykin] FINRA announced that Citigroup Global Markets, Inc. agreed to (have its shareholders) pay a $3.5 million fine for having provided inaccurate mortgage performance information, for supervisory failures and other violations in connection with subprime residential mortgage-backed securitizations (RMBS's). Issuer Obligations. Issuers of RMBS's are required to disclose historical performance information for past securitizations that contain mortgage loans similar to those in the RMBS being offered to investors - enabling investors and others to assess the value of RMBS and in determining whether future returns may be disrupted by mortgage holders' failures to make loan payments.   [C-I Note: Although, shouldn't it be that, 'past performance is not an indication of future results'?]

"Citigroup posted data for its RMBS deals that it should have known was inaccurate; and even after they learned that the data was inaccurate, Citigroup did not correct the problem until years later. Investors use this data to inform their decisions and in this case, for over six years, investors potentially used faulty data to assess the value of the RMBS." -- Brad Bennett, FINRA EVP, Chief of Enforcement.

FINRA Findings and Allegations. From January 2006 to October 2007, Citigroup allegedly posted inaccurate mortgage performance data on its website, where it remained until early May 2012, even though the firm lacked a reasonable basis to believe that this data was accurate. On multiple occasions, Citigroup was informed that the information posted was inaccurate, yet failed to correct the data until May 2012.  For 3 subprime or Alt-A securitizations, the firm provided inaccurate mortgage performance data that may have affected investors' assessment of subsequent RMBS. Citigroup further failed to supervise MBS pricing, lacking procedures to verify the pricing of these securities and not sufficiently documenting steps taken to assess the reasonableness of traders' prices. Also, Citigroup allegedly failed to maintain required books and records - e.g., when it re-priced mortgage-backed securities following a margin call, Citigroup failed to maintain a record of the original margin call, document the supervisory approval or demonstrate that the revised price was applied to the same position throughout the firm. FINRA Staff Credits. Investigation by Jeanne Elmadany, Allen Boyer, and Thomas Cortese; supervised by Susan Light, Enforcement Chief Counsel and assisted by FINRA Risk Oversight and Operational Regulation. For further details, go to:   [FINRA News Release, 5/22/12] and    [FINRA AWC # 2008012808101]