SEC/Citigroup tapped $30 Mln/Analyst to blame... /the corruption will likely never stop....
| Citigroup Fined $30 Million For Misconduct on Apple Supplier Research | By Saabira Chaudhuri
Citigroup Inc.(C) on Thursday was fined $30 million by Massachusetts for misconduct by a research analyst who in December provided confidential information about a major supplier of Apple Inc. (AAPL) iPhones.
A representative of Citigroup didn't immediately respond to a request for comment.
The fine was levied by the Secretary of the Commonwealth of Massachusetts William F. Galvin. Recipients of the nonpublic information about the supplier--Hon Hai Precision Industry Co. Ltd. (2317.TW)--include SAC Capital, T. Rowe Price, Citadel and GLG Partners according to the Secretary's office.
Citigroup Global Markets Inc., the bank's investment-banking arm, is also required to perform a three-year review of its policies regarding the disclosure of confidential information.
"It seems that the concept that investors are to be presented with a level playing field when it comes to the product of research analysts is a lesson that must be learned over and over again," Secretary Galvin said, "but it's important that it should be taught as often as necessary."
According to the Secretary's office, Kevin Chang--a research analyst employed by a Taiwanese affiliate of Citigroup--released unpublished research information to a hedge fund and institutional clients one day before publishing virtually identical information to the public.
On Dec. 13, following the publication of a report cutting Hon Hai production numbers by the Macquarie Group, an Australian competitor to Citi in covering Hon Hai, Mr. Chang was pressured by large hedge fund and institutional clients for his research on Hon Hai, according to the Secretary's office.
In response, Mr. Chang released the information to at least three units of SAC as well as to other hedge fund and institutional clients, said the Secretary's office. Mr. Chang then published his Hon Hai research on Dec. 14th, which included virtually identical information to what he had given SAC and the others the previous day.
The Securities Division, alleges that the Hon Hai research report, "containing significant cuts in Apple iPhone production numbers, would have a detrimental impact on Apple." The order also says that three Citi clients executed sales of Apple stock between receiving the information and the publication of Mr. Chang's Hon Hai report.
This isn't the first time Citi has been slapped with a fine related to leaking confidential information. Citi was fined $2 million last year for failing to supervise Internet Analyst Mark Mahaney and a junior analyst he oversaw after the pair allegedly ran afoul of rules covering disclosures to the media about Facebook Inc.(FB) and Google Inc. (GOOG)
A representative of SAC didn't immediately respond to a request for comment.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com |
