The Financial Industry Regulatory Authority (FINRA) announced on August 9, 2011, its decision to fine Citigroup Global Markets Inc. for failing to supervise one of its former registered sales assistants, Tamara Moon. Moon was employed at Citigroup’s Palo Alto, California, office and misappropriated a total of $749,978 over 8 years. In addition, she engaged in unauthorized trading and falsified account records. Moon’s discretions were made possible by Citigroup’s supervisory lapses, according to FINRA’s securities arbitration proceedings.
FINRA’s decision to fine Citigroup comes just under two years after its decision to bar Moon, which was announced on August 25, 2009. In connection with that decision, Susan L. Merrill, FINRA’s Executive Vice President and Chief of Enforcement at that time, said, “Firms have an obligation to supervise all of their personnel, including sales assistants who have access to confidential customer account information.” Current FINRA Executive Vice President and Chief of Enforcement Brad Bennett said, “Tamara Moon used her knowledge of Citigroup’s lax supervisory practices at the branch to take advantage of some of the firm’s most vulnerable customers, including the elderly. Citigroup had reason to know what she was doing and could have stopped her.”
Moon’s 22 victims consisted of individuals she thought were unable to properly monitor their accounts and included the elderly and the ill. In one case, Moon created a fake account for her father and used the account to misappropriate $30,000 of her own father’s money and $250,000 of other Citigroup customers’ money. Setting up and maintaining this account required Moon to forge her father’s signature multiple times. In another case, Moon stole $26,000 from an elderly widow by moving money from the widow’s account to other accounts, including some owned by Moon and some owned by other Citigroup customers, without authorization.
According to FINRA, “Citigroup failed to detect or investigate a series of ‘red flags’ that upon further inquiry should have alerted the firm to Moon’s improper use of customer funds.” These “red flags” included conflicting information highlighted in exception reports of new accounts and suspicious transfers on customer account records. In addition, the firm should have implemented reasonable systems and controls for the supervisory review of customer accounts. Such systems and controls could have prevented or detected new account applications and records that had been falsified by Moon.
In both securities arbitration hearings, neither Moon nor Citigroup confirmed nor denied the charges.