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Citigroup pays $2 million for improper disclosure of financial information

Many new businesses in Texas, and around the world, are probably discovering just how complicated business law can be. There are a lot of complex state and federal laws that must be adhered to; all it can take is one small mistake and your company is in the middle of a lawsuit that can cost you millions.

Citigroup quickly discovered how strict the laws really are when they were forced to pay Massachusetts regulators $2 million in settlement charges after an analyst allegedly disclosed Facebook's IPO, or initial public offering, to a news website before stock trading had begun for the social media giant.

According to the case, a junior analyst for Citigroup allegedly emailed some research regarding Facebook's projected stock potential during the 40 day "silent period." At the same time, Facebook's lead underwriter, Morgan Stanley, allegedly revealed earnings and revenue forecasts to select clients, leaving the rest of the investing public in the dark.

The state's top securities regulator charged Citigroup with breaking securities law that strictly prohibits analysts at underwriting firms from sending written research or other written content during the 40-day silent period.

Citigroup allegedly fired the junior analyst and underwriter involved in the information leak and said that it is pleased to know that the situation is over and behind them.

As of yet, no charges have been filed against Morgan Stanley because it is unclear whether there are industry rules that prohibit brokerages from giving information to select groups of clients.

Source: Thomson Reuters News & Insight, "Citi fined $2 mln over Facebook IPO, fires two analysts," Svea Herbst-Bayliss and Alistair Barr, Oct. 26, 2012

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