14 DAY TRIAL // The US Securities and Exchange Commission (SEC) has fined Citigroup $7 million after it discovered that a programming error resulted in Citigroup unwittingly submitting incomplete reports for the past 15 years.
The error came to light in April 2014, when the SEC asked Citigroup, one of the largest banking and financial conglomerates in the US and the world, to submit a very large and in-depth report about some of its past securities trades.
The Citigroup technical team tasked with putting together and then verifying the data discovered that the software that generated the reports was leaving out a large chunk of information.
Software thought 10A, 10B, 10C was less than 100
The team found that the error was in the way the automated software was filtering through the three-digit codes associated with Citigroup branches.
When developers created the software, Citigroup used three-digit numerical codes for each branch. Engineers set aside all codes between 089 and 100 and marked them as "for testing purposes."
The situation changed in May 1999, when Citigroup needed more codes than previously thought because of its ever-growing network.
Engineers extended the system's capabilities by adding support for alpha-numerical codes, which used both numbers and letters. This is the way Citigroup engineers explained the software error to the SEC:
“ The reporting logic treated letters, such as A, B, C, as being less than the number 0. Therefore, 10B was treated as being a three-digit number with a value less than 100. ”
Because of this, trading operations from several Citigroup branches were automatically assigned to the "for testing purposes" range, and not included in SEC reports.Programming error yields a $7 million fine
Citigroup informed the SEC about their issue when they had to turn in the 2014 report, in January 2015. Under normal circumstances, the SEC would have probably ignored the problem and asked Citigroup to correct some of their past reports.
However, because the problem had gone undetected for fifteen years, between May 1999 and April 2014, the SEC had to start an official inquiry, which concluded two days ago, with the SEC fining Citigroup.
According to the report, Citigroup failed to include details about 26,810 transactions in over 2,300 reports requested by the SEC.
"Broker-dealers have a core responsibility to promptly provide the SEC with accurate and complete trading data for us to analyze during enforcement investigations," said Robert A. Cohen, Co-Chief of the SEC Enforcement Division’s Market Abuse Unit. "Citigroup did not live up to that responsibility for an inexcusably long period of time, and it must pay the largest penalty to date for blue sheet violations."