Commentary June 28, 2022 at 07:44 AM Share & Print
What You Need to Know
- A three-person arb panel ruled in favor of an ex-Citi broker who had accused the firm of gender discrimination and retaliation.
- The company was ordered to pay $1.4 million in compensatory damages, plus interest and legal fees.
- Citigroup said it disagreed with the panel’s decision and plans to explore its options.
Arbitrators have ordered Citigroup to pay more than $1.4 million to a former broker at the firm who had sued, alleging unlawful gender discrimination and subsequent retaliation in the terms, conditions and privileges of her employment at the company after she complained about the alleged discrimination.
Erin Ann Daly filed a complaint against the company on Nov. 28, 2016, in U.S. District Court for the Southern District of New York in Manhattan. But on Feb. 6, 2018, Judge Richard J. Sullivan dismissed her Sarbanes-Oxley whistleblower claim and referred her other claims to arbitration.
Daly took her case to the Financial Industry Regulatory Authority’s Dispute Resolution Services. Last week, a three-person public arbitration panel ruled in her favor. The decision was posted Friday on FINRA’s website.
The panel ordered Citigroup to pay Daly $1.4 million in compensatory damages, plus interest on that sum at the rate of 3.25% per annum from the date of the award, through and including the payment of the award in full, and $42,000 in attorneys’ fees.
The panel also recommended the expungement of the reason for termination and termination explanation in Section 3 of Daly’s Form U5 filed by Citigroup on Dec. 23, 2014, and maintained by the Central Registration Depository.
The Financial Industry Regulatory Authority has ordered the National Securities Corp. of New York, a brokerage firm, to pay a total of $9 million in fines, disgorgement of profits, and restitution to investors tied to 10 public offerings in which “NSC attempted to artificially influence the market for the offered securities,” as well as to other misconduct and violations.
“Investors are entitled to rely on a market that is free from artificial price movement created by underwriters,” according to Jessica Hopper, head of FINRA’s Department of Enforcement. “We will continue to vigilantly enforce rules designed to prevent underwriters from influencing the market for an offered security, including supporting the offering price by creating a perception of aftermarket demand.”
FINRA found that between June 2016 and December 2018, NSC — while acting as an underwriter for three initial public offerings and seven follow-on offerings — “violated Rule 101 of Regulation M under the Securities Exchange Act of 1934 by unlawfully inducing or attempting to induce certain customers to purchase stock in the aftermarket of the offerings prior to their completion.”
The regulator also found that NSC violated Regulation M in connection with 10 offerings “by engaging in … misconduct during each offering’s restricted period.”
The misconduct included, for instance, “expressly conditioning allocations on a branch manager’s or representative’s agreement to buy a specific number of shares in the aftermarket for the branch’s or representative’s customers (known as ‘tie-in agreements’), and “threatening to reduce allocations to representatives who would not agree to solicit their customers to participate in the aftermarket.”
The settlement reached with NSC resolves other charges, such as that from April 2018 and July 2018, the firm “negligently omitted to tell investors in two offerings related to GPB Capital about delays in the issuer’s required public filings, including audited financial statements,” according to FINRA.
For its part, NSC said in a statement Thursday that “it is pleased to have resolved this legacy matter and remains fully committed to complying with its regulatory requirements as it focuses on supporting its clients.”
The firm added that it “has worked in full cooperation with FINRA and has undertaken several measures to resolve the matters referenced while continuing to enhance its regulatory compliance posture.”
Also, NSC noted that it has left the investment banking business and “has taken active steps to der-isk the firm, including eliminating high-risk business lines and registered representatives.”
The panel recommended that the reason for termination be changed to “other” and the explanation be deleted in its entirety and be replaced with the following language: “In a decision on Ms. Daly’s gender discrimination and defamation claims, an arbitration panel has found that she was illegally discharged.”
Citigroup on Tuesday told in a statement: “As we have maintained for the last six years, we do not believe Ms. Daly’s claims have any merit. We disagree with this decision and will explore our options.”
Michelle Daly, the attorney representing the former broker, countered that, : “The arbitration panel correctly found that Citi acted in violation of several laws. However, we believe Citi will continue to deny and delay justice to deter other whistleblowers.” Erin and Michelle are sisters, the attorney said.
(Pictured: Citigroup headquarters in New York)