SEC Charges Citigroup Global Markets for Violations of Recordkeeping Requirements

The Securities and Exchange Commission (SEC) has reached a settlement with broker-dealer Citigroup Global Markets Inc. (CGMI) which requires the firm to pay a civil penalty of $2.9 million after it was found to have violated recordkeeping requirements concerning expenses incurred in connection with its underwriting business. According to the SEC’s order, from at least 2009 through May 2019 CGMI used an unsubstantiated and unverified method to calculate and record indirect expenses associated with its work as an underwriter. CGMI calculated an indirect expense amount based on a fixed percentage of the underwriting fee for each deal where it was engaged as a lead underwriter and then divided that amount into specific categories of expenses without any review or process to verify the accuracy of the calculations. The SEC issued the cease-and-desist order and charged CGMI with violating Section 17(a) of the Exchange Act and Rule 17a-3 thereunder. CGMI settled with the SEC without admitting or denying the findings.