NYSE Disciplines Salomon Smith Barney for Supervisory Failures - March, 2005
Citigroup Global Markets Inc. f/k/a Salomon Smith Barney, Inc. of New York City, a member firm, and P. Campbell Hillstrom of Chicago, IL, a firm Institutional Equity Salesman, consented without admitting or denying guilt to findings relating to the dissemination of misleading electronic communications.
An NYSE hearing panel found that, in 2000 and prior years, the firm failed to properly train and supervise its employees with respect to the dissemination of electronic communications.
Specifically, the firm failed to have proper procedures and controls in place to prevent employees from disseminating false and misleading electronic communications.
The panel found that as a result of these failures, during June 2000, Hillstrom drafted and sent an e-mail, which contained inaccurate and misleading information about a stock that he attributed to a firm analyst. Although Hillstrom stated in the e-mail that the Firm did not cover the stock, the electronic communication resulted in the misperception in the market that a firm analyst had downgraded the stock. The panel also found that the misperception, in addition to other information contained in the e-mail, caused an increase in trading and a sharp decline in the stock’s price.
The NYSE imposed a penalty on the firm of a censure and a $350,000 fine and on Hillstrom a censure, nine-week suspension, and a $40,000 fine. Citigroup Global Markets and Hillstrom consented to the penalties, respectively.