Citigroup fined $30 million by Massachusetts’ regulator for its analyst sending unpublished information on a major Apple Inc. (NASDAQ:AAPL) supplier early.


The fine is one of the largest by Secretary of State William F. Galvin’s securities division.

Citi Analyst Published To Large Clients In Advance

Massachusetts’ secretary office alleged Kevin Chang, a research analyst employed by a Taiwanese affiliate of Citigroup, released unpublished research information about Apple supplier Hon Hai Precision Industry Co. to large institutional clients ahead of publishing to the general public.

Galvin alleged that on December 13 last year, Kevin Chang sent research about the major Apple Inc. (NASDAQ:AAPL) iPhone supplier to SAC, T. Rowe Price, Citadel and GLG Partners. However, the information wasn’t released to the general public until three days later.

Galvin highlighted that the Hon Hai research report contained significant cuts in Apple iPhone production numbers and would have a detrimental impact on Apple.

Galvin’s office alleged that the early release of the report facilitated those clients to potentially avoid losses or take profitable short positions. Besides this, the secretary’s office pointed out that between December 13 and 14, Apple Inc. (NASDAQ:AAPL) shares fell over 5 percent.

In a published statement, Citigroup Inc (NYSE:C) admitted to the Massachusetts authorities’ statement of act, but it neither admitted nor denied any violations of law.

Citi’s Strange Update On Apple

As reported by us earlier, Citi Research affirmed a Buy rating on Apple Inc. (NASDAQ:AAPL) in their November 25, 2012 coverage. However, in their December 16th report, strangely they cut Apple’s rating from buy to neutral. We felt this looked very strange and awkward for Citi Research, though they spent 17 pages trying to explain how their opinion can change so rapidly.

We also highlighted how Citi analysts had just returned from meetings with the hardware supply chain in Asia and how the analysts cut their estimates for Hon Hai Precision by the weekend.

Citi Paid $2 Million A Year Ago

About a year ago, Citi paid $2 million when one of its junior analysts improperly shared an unpublished take on Facebook Inc with a journalist before the company’s IPO. In this case, Citi had to cough up the amount to settle the allegations from Galvin’s office.