Citigroup Fined $2 Million for Facebook IPO Leaks

Andrew Klips |

Citigroup Fined $2 Million for Facebook IPO LeaksThe tale of Facebook Inc.’s (FB) May initial public offering unfolded further Friday as the Massachusetts Securities Division slapped a Citigroup (C) unit, Citigroup Global Markets Inc., with a $2 million fine for improperly supervising analysts that disclosed confidential information related to the IPO. Citigroup was part of the team of banks that helped underwrite the Facebook IPO. Because of the disclosure blunder, Citigroup has fired senior Internet analyst Mark Mahaney and an unnamed junior analyst responsible for information leaks about Facebook’s IPO as well as unpublished revenue estimates for Google Inc.'s (GOOG) YouTube.

Mahaney has consistently ranked in the top position among Internet analysts according to Institutional Investor Magazine.
A consent order on the Massachusetts government website said Citigroup "failed to prevent or detect the written disclosure of material, nonpublic research information in a restricted period prior to the Facebook IPO."

Although Mahaney was just dismissed from his job Friday morning, the junior analyst was terminated on September 27. Massachusetts Secretary of the Commonwealth William Galvin said the junior analyst shared private information with online media firm Techcrunch.com regarding Mahaney’s estimates on Facebook revenue and risks and positives with the IPO. The Techcrunch employee was a friend of the junior analyst while they both were at Stanford University, according to Galvin.

In its investigation, the state uncovered emails from Mahaney to a French business magazine sharing confidential information about YouTube revenue estimates and emails from the junior reporter to TechCruch employees.

In an email cited in the order related to Mahaney’s info sharing, the analyst actually wrote, "this could get me in trouble. Shoot." He certainly wasn’t wrong with that statement.

Forewarning others, Galvin commented, "This penalty should serve as a warning to the industry as a whole.”

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
FB Facebook Inc. 119.68 0.77 0.65 17,464,736
C Citigroup Inc. 60.04 -0.11 -0.18 22,804,941
SEV Sevcon Inc. 9.29 0.76 8.91 7,434
GOOG Alphabet Inc. 789.29 12.87 1.66 1,821,914

Comments

Emerging Growth

Winston Gold Mining Corp.

Winston Gold Mining Corp is a mineral exploration and development company. The Company is engaged in acquiring, exploring, developing, and operating mining properties.

Private Markets

Cross Campus

With over 500 members and operating 80,000 square feet by summer 2016, Cross Campus is one of the country’s top ten shared, collaborative office or "coworking" operators in the US.…

Wealthfront

Wealthfront is an automated investment service that serves as an alternative to traditional financial advisory services. The company manages a diversified, continually rebalanced portfolio of index funds on their clients’…