Citigroup Agrees to Settle with FINRA by Paying A Fine of $1.5m

Under the terms of a settlement with the Financial Industry Regulatory Authority (FINRA), Citigroup Global has agreed to pay a $1,500,000 fine. Since at least January 1, 2014, the company has violated Rule 200(f) of Regulation SHO and FINRA Rule 2010 by inappropriately incorporating non-broker-dealer affiliate securities positions in two of its aggregate units when determining the net positions of the aggregation units.

According to FINRA, from at least 2014 until the present, Citigroup has included non-broker-dealer affiliate accounts in two of its AGUs. One AGU contained six accounts from two non-broker-dealer affiliates, while the other contained about 6,700 accounts from 15 non-broker-dealer affiliates.

The inclusion of non-broker-dealer affiliate securities positions in the firm's AGUs influenced the assessment of the AGUs' net position for order marking purposes. Rather than assessing the net position of the company's accounts inside the AGU individually and the net position of each affiliate separately, as required by Regulation SHO, the firm marked all sell orders based on the net position of all accounts in the AGU. As a result, the firm did not appropriately compute the net positions of two of its AGUs or analyze their long and short sales. Therefore, the firm violated Regulation SHO Rule 200(t) and FINRA Rule 2010.

By late 2015, Citigroup became aware that the participation of non-broker-dealer affiliates was not authorized under Rule 200 (f). Nonetheless, the company did not start withdrawing its non-broker dealer affiliates from the AGUs until 2021. The company failed to take reasonable steps to address known Rule 200(f) inadequacies in a timely manner. As a result, the firm broke FINRA Rules 3110 and 2010.