20 April 2018
visit www.nextgenbanking.co.uk

Finra fines Citi $600,000 for weak trade supervision

13 October 2009  |  5125 views  |  0 citi bank

Citi has been fined $600,000 by US regulators for lax supervision of trading strategies that helped foreign clients avoid taxes on dividends. The firm also failed to adequately monitor Bloomberg messages used to communicate about the trades.

The Financial Industry Regulatory Authority (Finra) says that Citi failed to supervise and control trading activities because it lacked procedures designed to detect and prevent improper trades between the firm and certain counterparties.

When dividends on stock in US companies are paid to foreign investors, they can be subject to withholding taxes.

Between 2002 and 2005, Citi employed a strategy of buying stock from foreign broker-dealer customers and then selling it back to them after a series of steps that meant withholding taxes were avoided.

The bank paid about $24 million to the Internal Revenue Service in 2006, and earlier, in connection with the strategy.

Between 2000 and 2004, the bank also employed a strategy designed to enhance - for the financial benefit of the firm itself - the after-tax yield on Italian stocks.

In addition, Citi's New York desk and counterparties used Bloomberg-terminal messages to communicate about the US equity trades with foreign clients for around a year before they were incorporated into the firm's e-mail review system.

Susan Merrill, chief of enforcement, Finra, says: "Increasingly complex trading strategies must be governed by supervision that is equally sophisticated and detailed. In this case, Citigroup's inadequate supervision resulted in improper trading related to the execution of strategies involving transactions with a principal purpose of limiting tax liability."

Citi neither admitted nor denied the charges, but consented to the watchdog's findings. Finra says the bank discovered and reported the violations itself and this was taken into account when deciding the punishment.

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Citi, UBS and Deutsche Bank fined over outsourced IPO communications

Citi, UBS and Deutsche Bank fined over outsourced IPO communications

22 September 2009  |  6467 views  |  0 comments
Citi opens Singapore operations and technology hub

Citi opens Singapore operations and technology hub

21 July 2009  |  7416 views  |  0 comments
Citi ramps up IT integration project - FT

Citi ramps up IT integration project - FT

22 May 2009  |  7484 views  |  0 comments
Programming problems led to $1.1m fine for former Wachovia units

Programming problems led to $1.1m fine for former Wachovia units

24 March 2009  |  5255 views  |  0 comments
E*Trade units fined $1m over AML failings

E*Trade units fined $1m over AML failings

05 January 2009  |  8750 views  |  0 comments

Related company news

 

Related blogs

Create a blog about this story (membership required)
Visit http://response.ncr.comvisit www.ebaday.comVisit www.nextgenbanking.co.uk

Top topics

Most viewed Most shared
Revolut launches spare change savings toolRevolut launches spare change savings tool
9493 views comments | 14 tweets | 19 linkedin
TransferWise becomes first non-bank to open settlement account with BofE RTGSTransferWise becomes first non-bank to ope...
8441 views comments | 17 tweets | 30 linkedin
Barclays Bank sets up tech venture unitBarclays Bank sets up tech venture unit
8259 views comments | 16 tweets | 22 linkedin
Goldman Sachs acquires PFM startup Clarity MoneyGoldman Sachs acquires PFM startup Clarity...
7845 views comments | 9 tweets | 10 linkedin

Featured job

Basic c.£90K OTE c.£180K plus full benefits pac...
London based

Find your next job