The investment banking unit of Citigroup Inc. has been hit with a regulatory fine because it provided inaccurate performance data on nonprime residential mortgage-backed securities in the two years leading up to the global financial crisis.
At issue is performance data provided on prior securitizations that include similar loans as those being offered in new RMBS.
Investors utilize the historical data to assess value on RMBS being offered. They also use the data to determine whether future returns might be disrupted by borrower defaults.
Citigroup Global Markets Inc. posted inaccurate mortgage performance data on its website from January 2006 through October 2007 on three subprime or Alt-A securitizations, the Financial Industry Regulatory Authority said Tuesday. The company reportedly lacked a reasonable basis to believe that this data was good.
Despite being advised on multiple occasions that the posted information was inaccurate, the data was left up until this month.
FINRA fined Citi $3.5 million as a result of the inaccurate data as well as supervisory failures and other violations in connection with subprime RMBS.
“Citigroup failed to supervise mortgage-backed securities pricing because it lacked procedures to verify the pricing of these securities and did not sufficiently document the steps taken to assess the reasonableness of traders’ price,” the statement said. “Also, Citigroup failed to maintain required books and records.
“In certain instances, when it re-priced mortgage-backed securities following a margin call, Citigroup failed to maintain a record of the original margin call, document the supervisory approval or demonstrate that the revised price was applied to the same position throughout the firm.”
Without admitting or denying the charges, Citi consented to the entry of FINRA’s findings.
