The Financial Industry Regulatory Authority on Tuesday fined Citigroup Global Markets Inc. $3.5 million in a settlement related to charges of nonconforming residential mortgage-backed securities violations that Citi neither admitted to nor denied.
FINRA charged, in findings Citi consented to, that the company provided inaccurate mortgage performance information, was involved in supervisory failures and other violations in connection with the securities.
Brad Bennett, FINRA's executive vice president, said in a press release that Citi provided data for its RMBS deals that it should have been apparent was inaccurate, and after finding out it was inaccurate it still was not corrected for several years.
Specifically, FINRA said the data for the period between January 2006 and October 2007 remained on Citi's website until May of this year.
Data for three subprime or alternative-A credit securitizations, inaccurate performance data may have affected investors’ assessment of subsequent RMBS, according to FINRA.
FINRA also said there was a failure to supervise MBS pricing as Citi lacked procedures to verify that pricing and, in addition, lack sufficient documentation of steps taken to assess whether traders' prices were reasonable.
The regulator said in certain instances when Citi repriced MBS following a margin call, it failed to keep a record of the original margin call, document supervisory approval or demonstrate the revised price got applied to the same position firm-wide.