Massachusetts regulators on Friday fined a Citigroup unit $2 million for failing to prevent analysts from illegally leaking confidential information about Facebook's initial public offering.
Under U.S. securities law, IPO underwriters are not allowed to publish research on a company until 40 days after the IPO date, according to the order issued by William Francis Galvin, the secretary of the commonwealth.
According to Galvin, an unnamed junior analyst emailed a document to reporters at TechCrunch.com that outlined confidential details about Citigroup's outlook for Facebook's revenue after its IPO.
"It is essential in these times of rapid and diffuse means of communications that financial institutions be vigilant to ensure that the rules on IPOs are observed by all their personnel so that the integrity of the process is maintained," Galvin said. "This penalty should serve as a warning to the industry as a whole."
Galvin's office also found emails showing that a senior analyst at Citigroup emailed non-public information about YouTube to a French business magazine in April. In an email cited in the order, the analyst wrote "this could get me in trouble. Shoot."
A spokeswoman for Citigroup confirmed that the analyst, Mark Mahaney, is no longer with the company.
In the run-up to Facebook's IPO, Citigroup and other underwriters were criticized for sharing critical information about the company with select clients, while most investors were kept in the dark.
However, by fining Citigroup for sharing information with reporters, Galvin's office could make analysts at investment banks less likely to speak openly with the press. This, in turn, could ultimately hurt investors by limiting their access to unbiased information.
In a statement, Citigroup said it was pleased to have the matter resolved. "We take our internal policies and procedures very seriously and have taken the appropriate actions," the bank said.
Facebook declined to comment.
Not a member yet?Sign up now for a free account
|Ousted Yahoo exec gets $58 million golden parachute|
|Canadians arrest a Heartbleed hacker|
|US Airways won't fire worker who sent lewd tweet|
|Obama would cut deficits by another $1 trillion|
|Hybrid laundromat-cafes are popping up across the country|