Risk Management

Citi Fined $7M Over ‘Blue Sheet’ Compliance

The $7 million fine is a record in an SEC case alleging blue sheet data omissions by a broker dealer.
Matthew HellerJuly 12, 2016

Citigroup has agreed to pay a record $7 million penalty to settle charges that it provided incomplete “blue sheet” information about trades for 15 years because of a computer coding error.

The U.S. Securities and Exchange Commission said Tuesday that the error caused Citigroup to omit 26,810 securities transactions from its responses to more than 2,300 blue sheet requests between May 1999 and April 2014 , when the bank discovered the glitch.

The information in the electronic blue sheet system (EBS) includes the time of trades, types of trades, volume traded, prices, and other customer identifying information. In an administrative order, the SEC also faulted Citigroup for failing to promptly report the coding error or take steps to produce omitted data.

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The $7 million fine is a record in an SEC case alleging blue sheet data omissions. Credit Suisse and OZ Management LP were both fined $4.5 million last year for similar compliance failures.

“Broker-dealers have a core responsibility to promptly provide the SEC with accurate and complete trading data for us to analyze during enforcement investigations,” Robert A. Cohen, co-chief of the SEC enforcement division’s market abuse unit. “Citigroup did not live up to that responsibility for an inexcusably long period of time, and it must pay the largest penalty to date for blue sheet violations.”

Citigroup’s EBS reporting system was designed to filter out transactions used for testing purposes, reporting only actual securities transactions. Trades used for testing were assigned a three-digit branch code ranging from “089” to “100.”

But in 1998 the bank introduced alphanumeric branch codes for the first time to accommodate its expanding number of customer accounts. After this change, the SEC said, the EBS system “could not distinguish between the testing branch codes and certain newly introduced alphanumeric branch codes.”

“[T]he program’s reporting logic treated those alphanumeric branch codes as falling within the omitted testing range between ‘089’ and ‘100,’” according to the SEC order.

The error was discovered in April 2014 after a Citigroup technical support team identified a trade that had been excluded from a blue sheet request.

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