Citigroup failed to conduct timely and adequate background checks on approximately 10,400 non-registered associated administrative staff and back office employees, according to FINRA which has fined the bank $1.25 million.
Among other alleged failures over a seven-year period ending in 2017, the bank failed to fingerprint more than 520 people even though federal securities laws require broker-dealers to conduct such background checks, according to FINRA. Fingerprints permit brokerages to verify whether people are subject to statutory disqualification from associating with a FINRA member firm, the regulator says.
The bank employs approximately 13,900 registered and non-registered employees, according to FINRA,
Sean Walters is CEO of the Investments & Wealth Institute.
He has been active in shaping education and standards within the financial advisor profession since 1997 and has worked in senior leadership roles for member-based, nonprofit organizations since 1992.
Chuck Roberts, whose recommendations of structured notes landed the St. Louis firm a nearly $133 million arbitration award, was kicked out of the industry after ceasing to cooperate with a regulatory investigation.
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Citigroup’s screening procedures also fell short of what federal securities laws require, FINRA asserts. The regulator says it found that because of these failures, three individuals with criminal convictions were allowed to associate with the firm despite being subject to statutory disqualification.
"FINRA member firms must live up to their responsibility as a gatekeeper protecting investors from bad actors. It is important that firms appropriately screen all employees for past criminal or regulatory events that can disqualify individuals from associating with member firms, even in a non-registered capacity,” Susan Schroeder, executive vice president of FINRA's department of enforcement, said in a statement.
In addition to the fine, the bank is also required to undertake a review of its policies and procedures and report back to FINRA.
Citirgoup neither admitted nor denied the charges, but consented to the entry of FINRA's findings. The bank self-reported the matter to FINRA, according to the regulator’s disciplinary report.
A spokesperson for Citigroup could not be reached for immediate comment.
