The Financial Industry Regulatory Authority (FINRA) has issued a $1.25 million sanction against Citigroup Global Markets (Citigroup) for failing to conduct adequate background checks on personnel. According to FINRA, Citigroup did not adequately conduct background investigations of approximately 10,400 non-registered associated persons between 2010 and 2017.
FINRA found that at least 520 of the 10,400 employees improperly screened were not fingerprinted until after they became associated with Citigroup. Fingerprinting provides important information about a potential employee, including criminal background and statutory disqualification. As a result of failing to maintain properly screen prospective associates, Citigroup employed at least three individuals with criminal convictions in violation of federal regulations.
FINRA found that even where Citigroup properly fingerprinted prospective associates, it did not always screen them properly. Under Federal securities laws, brokers must screen prospective associates to determine if they have any disqualifying events in their background. While Citigroup’s screening procedures complied with federal banking laws which have a more limited list of disqualifying events, it did not screen for the more extensive list of disqualifying events pursuant to federal securities law.
The Executive Vice President of FINRA’s Department of Enforcement, Susan Schroeder said: “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.”
Citigroup consented to the entry of FINRA’s findings but did not admit or deny the charges.
If you believe that you have been misled by a financial advisor or wish to engage the services of a securities lawyer, please call the Costello Law Group at 410-832-800 (or Toll Free 877-418-0003) for a free consultation. Tom Costello of the Costello Law Group has 25 years of experience in stockbroker misconduct and investment fraud.