FINRA Fines Citigroup Brokerage Unit $1.25 Million for Lax Background Checks
The Financial Industry Regulatory Authority has fined Citigroup Global Markets Inc., the full-service brokerage affiliate of Citigroup Inc., $1.25 million for failing to conduct proper background checks on thousands of its associates over a seven-year period.
The Financial Industry Regulatory Authority has fined Citigroup Global Markets Inc., the full-service brokerage affiliate of Citigroup Inc., $1.25 million for failing to conduct proper background checks on thousands of its associates over a seven-year period.
Federal securities laws require broker-dealers to fingerprint certain associates working in a non-registered capacity to provide information about their criminal background, and firms use these results as part of their background check to determine whether a person had previously engaged in misconduct that would constitute statutory disqualification.
FINRA found that from January 2010 through May 2017, Citigroup Global Markets failed to conduct timely or adequate background checks on approximately 10,400 of its non-registered associates. Also, it did not fingerprint at least 520 of these associates until after they started working at the firm.
FINRA claims that when Citigroup Global Markets fingerprinted other non-registered workers, it failed to screen them as required by federal securities laws, and instead limited the screening to what was required by federal banking laws.
FINRA found that because of these failures, three individuals who should have been statutory disqualified because of criminal convictions were allowed to associate, or remain associated, with the firm for extended periods.
According to the complaint, one of the individuals remained at the firm for nearly 21 months before she was screened, while the other two remained for 16 months and 5 months each.
FINRA claims that this arose due to the firm’s failure to maintain a reasonable supervisory system to identify and properly screen all individuals who became associated in a non-registered capacity.
“FINRA member firms must live up to their responsibility as a gatekeeper protecting investors from bad actors,” said Susan Schroeder, executive vice president of FINRA’s Department of Enforcement. “It is important that firms appropriately screen all employees for past criminal or regulatory events that can disqualify individuals from associating with member firms, even in a non-registered capacity.”
In settling this matter, Citigroup Global Markets neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
