On March 19, 2012, the Financial Industry Regulatory Authority (FINRA) announced its decision to fine Citi Financial Services LLC for charging excessive markups and markdowns and related supervisory violations. In addition to a $600,000 fine, FINRA ordered Citi Financial to pay $648,000 in restitution and interest to wronged customers. Over 3,600 customers were charged excessive markups and markdowns, according to FINRA. Securities fraud attorneys appreciate FINRA decisions such as this one, which hold firms responsible for the fees they charge their customers.
According to FINRA’s findings, from July 2007 through September 2010, Citi International charged excessive markups and markdowns on corporate and agency bonds. These markups and markdowns, which were as low as 2.73 percent and as high as more than 10 percent, are considered excessive within the given market conditions, value of the services rendered and cost of transaction execution. Furthermore, from April to June 2009, reasonable diligence was not given to the purchase or sale of corporate bonds in order to present the most favorable price to customers. Citi International, a subsidiary of Citigroup Inc., neither confirmed nor denied the charges.
FINRA’s Executive Vice President of Market Regulation, Thomas Gira, stated, “FINRA is committed to ensuring that customers who purchase and sell securities, including corporate and agency bonds, receive fair prices. The markups and markdowns charged by Citi International were outside of appropriate standards for fair pricing in debt transactions, and FINRA will continue to identify and address transactions that violate fair pricing standards, regardless of whether a markup or markdown is above or below 5 percent.”