Today's Wall Street Criminal – Citibank
In a departure from the usual, Wells Fargo is not the Wall Street firm engaging in more misdeeds this week. Instead, it is Citibank which for some mysterious reason managed to go four years giving stock rating to individual investors that were at odds with the information it was giving its high-paying institutional clients.
According to the NY Times, “Citigroup misrepresented its analysts’ views of more than 1,800 stocks, telling small investors some had ‘buy’ ratings when in fact they were rated ‘sell,’ and vice versa. In other cases, individual investors got ratings information for stocks that Citigroup analysts had stopped covering altogether”. This “strange situation” somehow began in 2011 and somehow carried on until 2015 despite the fact that Citibank employees had apparently brought the discrepancy to the attention of management.
It certainly appears that Citibank was giving preferential treatment to its institutional clients. In addition, it is quite possible, even probable, that the bank was encouraging individual investors to buy the very same stocks that it was telling its institutional clients to short, thereby creating a windfall for those institutions when those stocks did fall.
FINRA has fined the bank nearly $12 million for this “strange situation”. But the most infuriating thing is that neither FINRA nor anyone at the banks seems to want to know how or why this happened. And if we are uninterested in finding out exactly what drove this unique situation, I think we can be sure it will happen again.
