FINRA and BATS Fine Citigroup Global Markets for Regulation M Violations

FINRA and BATS Exchange, Inc. announced that they have jointly ordered Citigroup Global Markets Inc. to pay approximately $1.1 million in connection with short selling ahead of participating in five public offerings of securities in violation of Regulation M Rule 105 ("Short Selling in Connection with a Public Offering") and supervisory requirements related to Rule 105.

According to the FINRA news release, from May 2009 to September 2010, Citigroup purchased a total of more than 1.5 million shares after having sold short 313,890 shares of the securities within the five business days leading up to the offerings. In concluding the settlement, Citigroup neither admitted nor denied the charges, but consented to the entry of FINRA and BATS findings.

See: FINRA Press Release; FINRA Action; BATS Action. Related news: SEC Announces Largest Monetary Sanction for Rule 105 Short Selling Violations (with Lofchie Comment) (March 5, 2014); SEC Charges Bermudian Investment Adviser and Principal for Short Selling in Violation of Regulation M (with Lofchie Comment) (February 3, 2014).For a general discussion of the application of Rule 105 of Regulation M to hedge funds and other investors, see the Trading Chapter of either the Guide to Hedge Fund Regulation or the Guide to Broker-Dealer Regulation.