Citigroup has agreed to a settlement with Apple, where it will pay the Cupertino manufacturer a $30 million fine after Citigroup analyst Kevin Chang improperly distributed confidential research about an Apple supplier. The unpublished research detailed Hon Hai Precision Industry's iPhone 4, 4S and 5 component orders to Citadel, GLG Partners, SAC, and T. Rowe Price. Citigroup's research included incorrect information about iPhone orders in the first quarter of 2013, which induced SAC, Citadel, and T. Rowe Price to sell a large quantity of Apple stock, depressing the price
William Galvin, Massachusetts' Secretary of the Commonwealth, said that the fine was 15 times the state's previous penalty against Citi in a case about the Facebook IPO and improper insider information, because Citi's own supervision of analysts -- which it promised it would do as part of the last fine -- has proven to be inadequate. "The Citi analyst should not have been that accessible to the clients, he should have been better protected by the compliance team," Galvin added.
"The emails between Kevin Chang and the hedge funds reveal this cozy culture which illustrates again that there are two types of customers; big ones, and retail customers who often don't receive this information," Galvin said in an interview with Reuters
. No criminal charges have been filed. Chang is no longer with Citigroup. Galvin has offered assistance on this case to the FTC and other regulatory agencies.
Citigroup Consent Order