Citadel Securities Fined by Finra for Trading Ahead of Clients

(Bloomberg) -- Citadel Securities, the brokerage majority owned by billionaire Ken Griffin, agreed to pay $700,000 to resolve an industry-backed regulator’s claims that the Chicago-based firm traded ahead of certain client equity orders.

The market maker traded over-the-counter stocks for its own account from 2012 to 2014 while simultaneously delaying client orders for the same shares, the Financial Industry Regulatory Authority said in an order dated July 16. The agreement, which wasn’t publicly announced, was signed on behalf of Citadel Securities by Stephen Luparello, the former high-ranking Finra and Securities and Exchange Commission official who is now general counsel for the firm.

Citadel was accused of failing to establish a supervisory process designed to comply with prohibitions against trading ahead of customer orders, according to Finra. The firm agreed to resolve the case without admitting or denying the findings, the regulator said.

“We have addressed all of Finra’s concerns and take very seriously our obligations to comply fully with its rules,” Julia Kosygina, a Citadel spokeswoman, said in an email statement. “The issue relates to a limited number of manually handled orders, most of which occurred in 2012-2014, and we are pleased to resolve this matter.”

Citadel Securities, a separate company from Griffin’s Citadel hedge fund, has benefited from a surge in equity trading since the coronavirus has whipsawed markets.

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