Citigroup Global Markets Inc. (CGMI) is facing charges from the Securities and Exchange Commission (SEC) for recordkeeping failures concerning underwriting expenses, according to a press release. The SEC revealed resolved cease-and-desist actions against this broker-dealer.

"Underwriters serve a critical role as gatekeepers in securities offerings," Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement, said. "They perform essential functions, including investor protection and also helping companies access capital to grow and innovate."

The SEC's order reveals that from 2009 to May 2019, CGMI employed an unsupported and unverified method to calculate and record indirect expenses linked to its role as an underwriter. CGMI determined these indirect expenses based on a fixed percentage of underwriting fees for each lead underwriting deal, subsequently allocating these amounts using fixed "allocation grids," according to the SEC's order. It was noted that CGMI had no understanding of the basis for this calculation method and conducted no verification process for its reasonableness.

The SEC's order charges CGMI with violating Section 17(a) of the Exchange Act and Rule 17a-3. Without admitting or denying the SEC's findings, CGMI has consented to a cease-and-desist order, a censure and a civil penalty of $2.9 million, according to the order.

The SEC's investigation, led by Chevon Walker, Mala Bartucci and Lindsay Moilanen from the New York Regional Office, along with support from the SEC Enforcement Division's Market Abuse Unit and the New York Regional Office Broker-Dealer and Exchange Examination Program, was supervised by Joseph Sansone, as per the agency's press release.