Home/Citigroup Agrees to Pay $10.5 Million for Violating Books and Records Rule and Inadequate Internal Controls

Citigroup Agrees to Pay $10.5 Million for Violating Books and Records Rule and Inadequate Internal Controls


On August 16th, 2018, the Securities and Exchange Commission (SEC) released its charges against Citigroup for books and records violations, inadequate internal controls and poor trade administration. 

From 2013 to 2016, the SEC found that three traders of Citigroup Global Markets Inc. (CGMI), Citigroup’s U.S. broker-dealer subsidiary, “mismarked illiquid positions” in some of the accounts they managed.  In two separate cases, the positions were mismarked to cover $81 million in losses from extensive unauthorized trading. 

The SEC’s order finds that CGMI failed to discover the trader misconduct because of its insufficient supervisory procedures and failure to verify the valuations of the mismarked positions independently. 

In addition, the SEC charged Citigroup for its failure to develop and maintain suitable internal accounting controls.  The SEC explained that Banamex, a Mexican Citigroup subsidiary, and Citigroup Inc. lacked the necessary procedures to verify invoices before making loans and allegedly ignored red flags that could have led to the discovery of approximately $475 million in loan fraud.  

Without admitting or denying the SEC’s charges, Citigroup and its related subsidiaries settled to pay $10.5 million in penalties and the traders involved with CGMI were terminated. Save


According to the SEC, Citigroup “fell short of its obligations” to manage its traders and maintain the necessary means to detect and prevent fraud.  As a result, Citigroup and its subsidiaries were in direct violation of the Books and Records Rule.

For more information about this case, or the Books and Records Rule, please reach out to Fairview directly. 

Sources: https://www.sec.gov/litigation/admin/2018/34-83859.pdf




By | 2019-06-28T21:17:42+05:00 Aug 20th, 2018|Fairview® Flash Reports|

About the Author:

Founded in 2005 with the goal of developing streamlined solutions for investment advisers, Fairview® is now servicing investment advisers, foundations, and funds with nearly $300 billion in collective assets.