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FINRA Fines Citi International Financial Services for Excessive Markups and Markdowns

The Financial Industry Regulatory Authority (“FINRA”) fined Citi International Financial Services, LLC, a subsidiary of Citigroup, Inc., for charging excessive markups and markdowns on corporate and agency bond transactions.

FINRA’s investigation concluded that from July 2007 through September 2010, Citi International charged markups or markdowns between 2.73% and 10%, which were excessive given market conditions, the cost of executing the transactions, and the value of the services rendered to its customers, among other factors.  FINRA stated “[t]he markups and markdowns charged by Citi International were outside of appropriate standards for fair pricing in debt transactions.”  FINRA’s Rules of Fair Practice established 5% as a reasonable guideline in markups and markdowns.  FINRA fined Citi International $600,000, and ordered it to pay more than $648,000 in restitution and interest to its customers.  According to FINRA, the firm’s supervisory procedures in reference to fixed income transactions had significant deficiencies.

By accepting the settlement, Citi International neither admitted nor denied the charges.