Citigroup Fined $30 Million for Apple iPhone Analyst Rulebreaking
The banking group, Citi has been fined US$30 million for misconduct by a research analyst who sent early copies of confidential information about an Apple iPhone assembly company to investors before it was made public.
The fine is one of the largest given in recent years for failings by a research analyst.
The fine was applied by the Massachusetts Securities Division who alleged that the researcher provided unpublished information to hedge funds and investors.
The allegations stem from actions by Citi Taiwan employee, Kevin Chang during November and December 2012.
The researcher had published a number of papers suggesting good prospects for Apple assembly partner, Hon Hai, but shortly afterwards, a rival researcher at Macquarie published a different less optimistic outlook for the company.
In early December, following repeated requests for clarification, Chang sent copies of his unpublished research to several clients prior to his December 14th public research note into the company.
In his previews he cut Apple's shipment forecasts, as Macquarie had done -- but a number of investors had effectively been tipped off by the preview documents they had been emailed over the previous two days.
At least two investors are alleged to have acted on that early release of information.
Anyone who did not get the preview would have been investing based on the analyst's previously bullish report.
Following an investigation, Citi has agreed to a US$30 million fine, and a number of reviews of its internal procedures to ensure such a breach does not occur again.
"We are pleased to have this matter resolved. We take our regulatory compliance requirements very seriously and train all of our employees about these obligations. We are also constantly working to improve, manage and monitor the compliance and controls process," said Citi in a statement.
Mr Chang no longer works for the company.