Citigroup Global Markets Inc. and Multiple BD’s Fined $5 Million for Allegedly Failing to Supervise Solicitation of Toys R Us IPO, Offering Favorable Research Coverage

Investment fraud lawyersIn April of 2010, Toys R Us (TRU) and its private equity owners reportedly brought in Citigroup Global Markets Inc. (CGMI) as well as other broker-dealers including Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley, Wells Fargo, Barclays Capital, Needham to compete for a role in TRU’s planned initial public offering, a FINRA Letter of Acceptance, Waiver and Consent (AWC) reports.

The AWC further alleges that CGMI and the aforementioned broker-dealers allegedly failed to implement adequate written supervisory procedures regarding the involvement of analysts in investment banking solicitations, and that they allegedly offered favorable research coverage, a FINRA Letter of Acceptance, Waiver and Consent (AWC) reports.

The AWC further notes that CGMI and said group of broker-dealers allegedly issued research reports from January 200I to April 2001 on Winstar Communications, Inc. that included misleading statements and omissions of material facts.

NASD Rules that CGMI and Several BD’s Violated NASD Rules; CGMI Consents to Censure and Fine of $5,000,000

CGMI, as well as other broker-dealers including Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley, Merrill Lynch, Wells Fargo, Barclays Capital, Needham allegedly took part in acts and practices that made and maintained inappropriate influence by investment banking over research analysts, and therefore imposed conflicts of interest on its research analysts, which it then failed to manage adequately, the AWC also concluded.

The AWC further alleges that CGMI and the aforementioned BD’s issued research reports on issuers that were not based on principles of fair dealing and good faith, did not provide a sound basis for evaluating facts which contained exaggerated or unwarranted claims about these issuers, and contained opinions for which there was no reasonable basis and failed to establish and maintain adequate procedures reasonably designed to protect research analysts from conflicts of interest.

As a result, CGMI, as well as Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, and Merrill Lynch, consented to a censure and a total payment of $400,000,000, including $150,000,000 as a fine, $150,000,000 as disgorgement, $75,000,000 for the procurement of independent research and $25,000,000 for investor education, according to the AWC.

Investment Recovery Lawyers Investigating

The Peiffer Rosca Wolf investment recovery lawyers often represent investors who lose money as a result of investment misconduct. Any investors who believe that they may have lost money investing in Citigroup and Credit Suisse, Deutsche Bank, Goldman Sachs,  JP Morgan, and Merrill Lynch’s public offering of Toys-R-Us, should contact the investment rights lawyers at Peiffer Rosca Wolf, Alan Rosca or Joe Peiffer, for a free, no-obligation evaluation of their recovery options, at 888-998-0520.

The Peiffer Rosca Wolf investment rights lawyers take most cases of this type on a contingency fee basis and advance the case costs, and only get paid for their fees and costs out of money they recover for their clients.

Alan Rosca (1225 Posts)

Alan is a securities lawyer. He also teaches Securities Regulation at the Cleveland-Marshall College of Law. He focuses his legal practice on complex commercial and financial litigation and arbitration, particularly in the areas of securities and investment fraud. His office is in Cleveland, Ohio.


In our legal system, every person is innocent until and unless found guilty by a court of law or a tribunal. Whenever we reference “allegations” or charges that are “alleged,” such allegations or charges have not been proven, and are merely accusations, not findings of fault, as of the date of the blog. We do not have, nor do we undertake, a duty to continue to monitor or follow cases about which we report, and/or to publish subsequent blogs regarding various developments that may occur in such cases. Readers are encouraged to conduct their own research regarding any such cases and any developments that may or may not have occurred in such cases.