Finra Fines Citigroup for Sloppy Background Checks on Employees
The Financial Industry Regulatory Authority on Monday fined Citigroup Global Markets $1.25 million for failing to conduct timely or adequate background checks on 10,400 non-registered associated persons over seven years.
Citigroup failed to fingerprint at least 520 of the non-registered associated persons as part of its pre-hiring procedures, and did not have records to determine if it completed the required tasks for some 520 others, Finra said.
It also failed to screen all 10,400 applicants, who were hired in non-brokerage roles, for felony and other criminal convictions, as required by securities laws, according to industry-funded self-regulatory organization.
At least three individuals were hired who were subject to statutory disqualification from working in the securities industry, the regulator said.
The alleged violations occurred between January 2010 and May 2017, after Citigroup sold its Smith Barney retail brokerage business to Morgan Stanley. The company continues to operate private banking activities.
“We are pleased to have the matter resolved,” said a spokesman for Citigroup, which agreed to Finra’s sanction without admitting or denying the charges.
“FINRA member firms must live up to their responsibility as a gatekeeper protecting investors from bad actors,” Susan Schroeder, executive vice president of Finra’s department of enforcement, said in a prepared statement.
“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.”