Citigroup Global Market New York Fined $3 Million Over ETF Sales Allegedly Affecting Over 255,000 Customers and 1.5 Million Purchases of ETFs

Citigroup Global Markets Inc. (CRD #7059, New York, New York)

was censured and fined $3,000,000, to be paid jointly to FINRA and the New York Stock Exchange (NYSE) for allegedly failing to deliver prospectuses in connection with sales of certain ETFs (Exchange Traded Funds) to customers.

FINRA's findings stated that Citigroup Global Markets failed to deliver prospectuses for approximately 255,000 customer purchases of approximately 160 ETFs during a three-month period for which Citigroup Global Markets self-reported the ETF prospectus delivery failure. As a result, from 2009 through April 2011, it is estimated that Citigroup Global Markets may have failed to deliver prospectuses for over 1.5 million purchases of ETFs by its clients.

FINRA's findings also stated that Citigroup Global Markets failed to design and implement an adequate supervisory system to achieve compliance with the securities laws governing ETF prospectus delivery. Citigroup Global Markets’ decentralized supervisory system was not designed to ensure compliance with its prospectus-delivery requirements, which in turn contributed to their failure to identify deficiencies in its process, to timely identify the scope of the problem after the firm detected certain failures in 2009, and to timely remedy the inadequacies in its manual process. Citigroup Global Markets did not appropriately respond to “red flags” indicating that it had experienced failures to deliver. Although the firm notes isolated ETF prospectus delivery failures in 2009, it did not determine the extent of the issue or fully recognize deficiencies in its supervision in these areas until 2010.

FINRA's findings also included that Citigroup Global Markets failed to establish, maintain and enforce supervisory control policies and procedures that tested and verified that its ETF prospectus-delivery procedures were in compliance with applicable securities laws and regulations and FINRA rules. The firm’s NASD Rule 3012 reports and 2009 and 2010 Annual Compliance Reports failed to adequately address ETF prospectus delivery testing and verification, did not refer to any tests of ETF prospectus delivery, and noted the ETF prospectus-delivery failures but failed to identify any additional or amended supervisory procedures created in response to the test results.
(FINRA Case #2011026502901)

This ends the summation of information which was obtained from FINRA's Website under "Disciplinary and Other Actions February 2015."

Soreide Law Group represents clients nationwide. If you or a family member have experienced a loss through the sale of ETFs from this firm or other brokerages, call a Securities Arbitration Lawyer for a consultation at no cost on how to potentially recover your losses. To speak with an attorney, call 888-760-6552.