Citigroup Global Markets Ordered to Pay FINRA Fine for Inadequate Supervision

The Financial Industry Regulatory Authority Inc. says it is fining Citigroup Global Markets Inc. $300,000 for its failure to reasonably supervise the commissions that clients were charged for stock and options trades. Citigroup Global Markets is Citigroup Inc’s brokerage and securities arm.

FINRA says that between April 2002 and January 2006, then-Citigroup representative Juan Carlos Hernandez charged 27 clients unreasonable commissions that substantially exceeded the firm’s calculated rate for appropriate charges. One client was reportedly overcharged about $1.2 million.

Citigroup let Hernandez go in February 2006 and one month later, without admitting to or denying FINRA charges, he consented to the findings made against him and was barred by FINRA.

FINRA contends that Hernandez was able to overcharge clients because Citigroup neglected to properly supervise him. FINRA also found that it wasn’t until October 2007 that Citigroup told its brokers about its calculated commission rates or that they weren’t allowed to charge commissions higher than these rates. In the cases when commissions were greater than Citigroup’s calculated rates, FINRA says the firm lacked the proper procedures and policies for determining whether a commission was inappropriate.

By agreeing to settle, Citigroup is consenting to FINRA’s findings but is not admitting or denying the charges. The firm offered to reimburse customers who were affected.

Related Web Resources:
Citigroup Global Markets Fined $300,000 for Failing to Supervise Commissions Charged to Customers on Stock and Option Trades, Marketwatch, November 13, 2008

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