FINRA imposes $1.25m fine on Citigroup Global Markets over inadequate fingerprinting of employees
The firm did not fingerprint at least 520 of the 10,400 non-registered associated persons until after they began their association with CGMI.
The United States Financial Industry Regulatory Authority (FINRA) today announces it has imposed a $1.25 million fine on Citigroup Global Markets Inc. over the firm’s failure to conduct timely or adequate background checks on approximately 10,400 non-registered associated persons over a seven-year period.
FINRA explains that, under Federal securities laws, broker-dealers are required to fingerprint certain associated persons working in a non-registered capacity prior to or upon association with the firm. The fingerprint results provide information about a prospective associated person’s criminal background, and firms use the results as part of their background check to determine, among other things, whether a prospective associated person has previously engaged in misconduct that subjects the individual to a statutory disqualification. Federal banking laws require banks to conduct similar checks on banking employees using a more limited list of disqualifying events.
FINRA found that from January 2010 through May 2017, CGMI failed to conduct timely or adequate background checks on approximately 10,400 of its non-registered associated persons. Also, the firm did not fingerprint at least 520 of the 10,400 non-registered associated persons until after they began their association with CGMI. This prevented the firm from determining whether any individuals were subject to statutory disqualification from associating with a FINRA member firm.
Moreover, the firm was unable to determine whether it timely fingerprinted at least an additional 520 non-registered persons. While CGMI fingerprinted other non-registered associated persons, it failed to screen them as required by federal securities laws, instead limiting its screening to what was required by federal banking laws.
In particular, FINRA found that because of these failures, three individuals who were subject to statutory disqualification because of criminal convictions were allowed to associate, or remain associated, with the firm during the relevant period. This arose from its failure to maintain a reasonable supervisory system and procedures to identify and properly screen all individuals who became associated with the firm in a non-registered capacity.
In settling this matter, CGMI neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.