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Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
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NEWSLETTERS & ALERTS
Citigroup Fined over 'Books and Records' and 'Trader Supervision' Violations
by Howard Haykin
Citigroup agreed to pay $10.5 million in penalties to settle 2 SEC two enforcement actions involving its books and records, internal accounting controls, and trader supervision. The charges stem from $81 million of losses due to trader mismarking and unauthorized proprietary trading and $475 million of losses due to fraudulently-induced loans made by a Mexican subsidiary.
SEC FINDING – 1ST ENFORCEMENT ACTION. From 2013 to 2016, 3 traders with Citigroup Global Markets Inc. (CGMI) mismarked illiquid positions in certain proprietary accounts they managed - in 2 instances covering losses from widespread unauthorized trading. Upon discovery of the mismarking, CGMI terminated the traders and recognized $81 million in losses.
The SEC concluded that CGMI failed to detect the traders’ misconduct earlier due to its inadequate supervisory procedures and systems and because it failed to independently verify the valuations of the mismarked positions.
SEC FINDING – 2nd ENFORCEMENT ACTION. Between 2008 and 2014, Citigroup subsidiary Grupo Financiero Banamex S.A. de C.V. loaned approximately $3.3 billion to Oceanografia, S.A. (OSA) based on invoices and work estimates for services that OSA provided to Petroleos Mexicanos (Pemex), the Mexican state-owned oil company. Many of those OSA work estimates were fraudulent and did not reflect amounts Pemex actually owed to OSA, and Citigroup ultimately lost some $475 million as a result of OSA’s fraud.
The SEC concluded that Banamex and Citigroup lacked the controls necessary to verify the invoices before making loans to OSA and ignored numerous red flags that should have led to discovery of the fraud.
- Citigroup Global Markets Inc. (CGMI) … is a New York corporation headquartered in NY, NY. CGMI is an indirect, wholly-owned subsidiary of Citigroup. CGMI is dually-registered broker-dealer / investment adviser.
- Citigroup … is a financial services holding company headquartered in NY, NY. Citigroup’s common stock trades on the NYSE - ticker symbol, ‘C’.
- Banamex … is a Mexican corporation and a wholly-owned subsidiary of Citigroup. It was created in August of 2001, when Citigroup acquired Banamex’s predecessor entity, Grupo Financiero Banamex-Accival. Banamex is a diversified financial services provider to a broad range of consumer and corporate customers, primarily in Mexico, and is the second largest bank in Mexico.