Citigroup fined $30 million after analyst sent report to SAC, others

Thu Oct 3, 2013 4:07pm EDT
 
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By Svea Herbst-Bayliss

BOSTON (Reuters) - Citigroup Inc will pay a $30 million fine after one of its analysts improperly sent confidential research on an Apple supplier to big clients including Steven A. Cohen's hedge fund SAC Capital Advisors, a securities regulator said on Thursday.

Citigroup analyst Kevin Chang emailed unpublished research about Hon Hai Precision Industry Co, a major supplier of Apple Inc iPhones, to SAC, T. Rowe Price, Citadel and GLG Partners, according to William Galvin, Massachusetts' Secretary of the Commonwealth.

Chang's research included lower order forecasts for Apple's iPhones in the first quarter of 2013, which would have had a detrimental effect on Apple, the regulator said.

SAC, hedge fund Citadel and mutual fund firm T. Rowe Price all sold Apple stock after receiving the information from Chang, a complaint filed by Galvin's office alleges.

At $30 million, the Massachusetts fine is both one of the biggest state securities regulators have ever collected and 15 times the $2 million they fined Citi for improperly disclosing research on Facebook's initial public offering only a year ago.

Galvin said the fine is so high because the case came less than one year after the Facebook case and illustrates that aspects of Citi's supervisory culture failed.

"The Citi analyst should not have been that accessible to the clients, he should have been better protected by the compliance team," Galvin added.

Galvin's office had filed civil charges against Citi for "failing to supervise", and the $30 million fine is the result of a settlement, he said. No criminal charges were filed.   Continued...

 
A man walks past a Citibank branch in lower Manhattan, New York October 16, 2012. REUTERS/Carlo Allegri