Citigroup Global Markets Inc. agreed to pay a US $7 million fine to the Securities and Exchange Commission to resolve charges that, from 1999 through 2014, it submitted 2,382 erroneous blue sheets with it and 753 erroneous blue sheets with the Financial Industry Regulatory Authority. (Blue sheets refer to trade data submitted by certain regulated entities, including broker-dealers, to the SEC and FINRA in an automated form in response to requests by the regulatory bodies in connection with their investigations, typically of equity market activity.) According to the SEC, these errors occurred as a result of a coding error in Citigroup’s electronic blue sheet computer system that was not detected until 2014. The coding error prevented the system from recognizing that data from branches that were assigned an alphanumeric code (as opposed to solely numeric branch codes) needed to be included in its blue sheet submissions, said the SEC. Moreover, the SEC claimed it was advised of Citigroup’s blue sheet issue only “over nine months after the issue was identified.” That being said, the SEC noted Citigroup’s “remedial acts … and cooperation” in accepting its offer of settlement. Separately, FINRA issued modifications to certain equity and option blue sheets’ data elements. These changes will be effective December 30, 2016.
Compliance Weeds: Just two weeks ago, Deutsche Bank Securities Inc. agreed to pay a fine of US $6 million to resolve charges brought by the Financial Industry Regulatory Authority that it filed “thousands” of deficient blue sheets with it and the Securities and Exchange Commission from 2008 through 2015. (Click here for details in the article, “Broker-Dealer Settles FINRA Blue Sheets Violation Allegation by Payment of US $6 Million Fine” in the July 10, 2016 edition of Bridging the Week.) Other broker-dealers have settled enforcement actions by the SEC for fines between $2.5 and $4.25 million related to alleged blue sheet violations. (Click here for an article about one of these matters in the article, “Broker-Dealer Assessed US $4.25 Million Fine for Two Years of Flawed Blue Sheets” in the October 4, 2015 edition of Bridging the Week.) Accurate blue sheet reporting is clearly on both the SEC’s and FINRA’s radar.