A financial group agreed to pay a total of $10.5 million to settle separate SEC enforcement actions against two affiliated entities for (i) supervisory and recordkeeping deficiencies and (ii) internal accounting control failures.
According to the first SEC Order, Citigroup Global Markets Inc. ("CGMI") (a wholly-owned subsidiary of Citigroup, Inc.) failed to adequately supervise several of its traders who engaged in mismarking positions and unauthorized trading in Citi proprietary accounts, resulting in inaccurate books and records. The mismarking episodes, which occurred on different trading desks, "involved opaque, illiquid positions that were overvalued by traders and not effectively price verified by Citi's valuation control group." Two of the episodes involved unauthorized trading in U.S. Treasury securities that resulted in concealed losses of millions of dollars.
The SEC alleged in a second Order that Citigroup, Inc. failed to maintain necessary internal accounting controls to ensure that Grupo Financiero Banamex, S.A. de C.V. ("Banamex") (a wholly-owned Mexican subsidiary) recorded transactions, as required under generally accepted accounting principles. The SEC alleged that Banamex loaned billions of dollars on the basis of invoices and work statements to Oceanografia, S.A. ("OSA") (a Mexican marine services provider) for services that OSA provided to another firm. Some of the documents provided by OSA, according to the SEC, "were fraudulent and included forged signatures." The SEC asserted that Banamex lacked (i) internal accounting controls in its accounts receivable factoring program and (ii) did not adequately identify and respond to red flags.
CGMI and Citigroup, Inc. did not admit to or deny the SEC's findings.
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