Last week, the US Securities and Exchange Commission (SEC) reached two settlements with Citigroup Inc after two of its affiliates - Citigroup Global Markets Inc. and Citigroup Alternative Investments LLC – were charged with failing to enforce policies designed to prevent and detect insider trading and misuse of non-public information and defrauding hedge fund investors during the financial crisis.
Citigroup will pay 195 million dollars and still Scott Helfman, its spokesman, said the bank was pleased to have resolved the matter. Obviously this does not come as a surprise.
Citi has been on the SEC’s radar since 2003 and faced several enforcement actions and lawsuits for, for instance, misleading investors in the offering of municipal securities. However, it did not stop them from breaking the law yet again or oblige them to admit to the SEC’s findings. Reaching settlements behind closed doors after years of of criminal misconducts goes against what enforcement should be.
The SEC has been waving with remissions and settlements every time banks are in trouble enabling them to continue to conduct business as usual. And their waiver processes are buried in secrecy and suffer from a chronic lack of transparency, hampering citizens' chances of finding out the real reasons behind each decision or objection by SEC’s commissioners.
The analysis of the situation by Better Markets hits the nail on the head. “For enforcement to work as punishment and deterrence, it has to be swift, commensurate with the violations, require full disgorgement plus fines, and meaningfully punish individuals. This SEC settlement, like so many others, fails those tests and follows a disturbing pattern of too little, too late”.
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