State Regulators Jump on Bandwagon of Sanctioning Wall Street Brokerages

The State of Texas sanctioned Citigroup Global Markets Inc. for failure to monitor the registration status of sales assistants, some of whom accepted client orders without being appropriately licensed.  Texas was part of a multi-state investigation into the practices of Citigroup Global and other firms in supervising sales assistants, who provide administrative and operational duties for the company’s broker-dealer agents.  While sales assistants who were registered with Citigroup could accept unsolicited orders from clients, it was  only from states where the sales assistant was registered.  The Consent Order’s findings reflect that sales assistants accepted unsolicited orders from clients in states where the sales assistant were not registered.

For the registration violations, Texas reprimanded Citigroup and fined it $35,000.  Not surprisingly, the order also requires Citigroup to establish and maintain policies, procedures, and systems to adequately ensure that sales assistants can only accept client orders from jurisdictions where they are registered.

The current focus of FINRA and the SEC on sales practices and conflicts of interest by the large Wall Street firms has increased substantially over the last few years, and it appears the state securities regulators now want a part of that action.  Luckily, Texas did not go for the higher sanctions that are currently being imposed by FINRA and the SEC.  With that said,  Citigroup still has to resolve any related issues with the other states who participated in the multi-state sweep, along with any future action FINRA might take related to the same events.