By Chad M. Kohler, Esq.
Citigroup Global Markets Inc., the brokerage and securities arm of banking giant Citigroup, admitted recently to regulators that from November 2007 through January 2012 it permitted employees who did not hold any securities licenses to operate one of its proprietary trading desks.
According to a Letter of Acceptance, Waiver & Consent (AWC) that was agreed to by Citi, the brokerage firm violated securities registration requirements by allowing a group of "portfolio managers" who were not registered with FINRA in any capacity to operate the Citigroup Principal Strategies Desk (CPS Desk). The firm also improperly allowed a "managing director" who was not registered with FINRA to supervise a portfolio manager.
The CPS Desk, formerly the Equity Principal Strategies Desk, was staffed by approximately 17 portfolio managers who had primary responsibility for the CPS Desk's trading decisions and approximately six traders who executed trades and interacted with counterparties at the portfolio managers' discretion. While the traders held the necessary Series 7 and Series 55 licenses, none of the portfolio managers, who directed trading activity on the CPS Desk, held any securities licenses in any capacity.
By agreeing to the AWC, Citi consented to a fine of $175,000 and a censure.