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Citi fined $30M for leaking iPhone supply chain data

post #1 of 16
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Citi has signed a consent order with the Massachusetts Secretary of State agreeing to pay $30 million after its analysts leaked information on Apple's iPhone supply chain to a number of big clients, including SAC Capital Advisors.



Late last year, Citi's method of covering Apple revolved around a "unique team approach," with semiconductor analyst Glen Yeung, software analyst Walter Pritchard, and hardware analyst Jim Suva sharing the duties. That team initially upgraded AAPL to a buy recommendation in late November, but by December 17 the firm had cut its rating to neutral.

In a note to its clients, Citi explained the rating and target price cuts as stemming from "near-term supply chain orders" that cast doubt on iPhone 5 demand. As many analyst firms do, Citi was estimating iPhone shipments based on production reports from suppliers, longtime Apple supplier Hon Hai in this case.

A consent order (PDF) released Thursday by Massachusetts Secretary of State William Galvin now reveals that Yeung had received word on those production quotes nearly a week earlier and that another Taiwan-based Citi analyst had been slipping that information to select funds ahead of Citi's reports.

Among the clients said to have received advance knowledge was SAC Capital, the hedge fund run by billionaire Steve Cohen. Both Cohen and SAC are under investigation over insider trading allegations, and the Citi revelation stemmed from that process. SAC joined T. Rowe Price in selling off Apple stock ahead of the release of Citi's actual report, according to Reuters.

The consent order quotes a number of emails between Citi analyst Kevin Chang and personnel from SAC. Secretary Galvin said those emails "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 levied a $30 million fine on Citi, one of the biggest state securities regulators have ever handed down. The size of the fine stemmed in part from Citi's embarrassing role in the difficulties surrounding Facebook's initial public offering last year. Citi's supervisory culture, Galvin said, has not yet learned its lesson from that event.

The $30 million fine is the result of a settlement, and there have been no charges filed in the case.

Apple chief Tim Cook has previously warned investors about the perils of relying on supply chain reports to divine the company's quarterly fortunes, noting that "the supply chain is very complex, and we obviously have multiple sources for things."

Current speculation has Apple diversifying its supply chain even further in 2014, moving from a partnership model ? the type it currently has with Hon Hai ? to a transaction model for some devices.
post #2 of 16

But no one can possibly be manipulating Apple's stock price.

 

/s

post #3 of 16
Glad to finally see fines for leaked information.

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Artificial intelligence is no match for natural stupidity.

 

"A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete...

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post #4 of 16
I would have thought prison is a more effective way to teach these lessons that the ANALysts have so much trouble learning.
post #5 of 16

Has to be Samsung behind this.

post #6 of 16
so when are they investigating UBS and muster?
post #7 of 16
Massachusetts started but didn't go far enough. Now that Citi has been caught its time for the Feds to go after more if these blatant criminals and shut them down. As for hedge funds how are these even legal?
post #8 of 16
What would have been wrong with a $300 Million fine?
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post #9 of 16
It's just customer money to Citi. Include some jail time and loss of license and see what happens. Also go after Citi's management and their personal funds.
post #10 of 16
30M ?

Is this like Samsung who robs every bit of Apple IP to build products and then gets fined a small % of their yearly company profit? Little justice if you ask me. $30M seems like little more than a slap on the wrist.
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #11 of 16
These are crimes! Why aren't these scumbags in jail? It is time that the people stood up and revolted against these financial institutions and hedgefunds, threw the bums in jail and dismantled their companies once and for all. Too big to fail means too big so let's make them all smaller and less powerful. Same goes for limiting the size of hedgefunds!
post #12 of 16
Two things. First, the Federal SEC needs to get involved. This should not only be a state effort. The financial penalty given the damage this caused needs to be several orders of magnitude larger than $30 million.

Second, Glen Yeung needs to be fired from Citibank for his role in this and barred from the securities industry.

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Windows survivor - after a long, epic and painful struggle. Very long AAPL

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post #13 of 16
Quote:
Originally Posted by Red Oak View Post

Two things. First, the Federal SEC needs to get involved. This should not only be a state effort. The financial penalty given the damage this caused needs to be several orders of magnitude larger than $30 million.

Second, Glen Yeung needs to be fired from Citibank for his role in this and barred from the securities industry.

I agree, plus people should go to prison.
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Enjoying the new Mac Pro ... it's smokin'
Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini.
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post #14 of 16
$30M is chump change compared to the profits made by these a$$holes. They may have shorted the stock prior to selling off in massive quantities. Very stupid. All these analysts should be stripped of their licences including the firm that employed them, Citi in this case.
post #15 of 16
Quote:
Originally Posted by digitalclips View Post


I agree, plus people should go to prison.

 

There is no question that these guys are crooks and need to face some consequences, but prison isn't the answer.  Prisons should be reserved for only those who pose a physical threat to society.  These guys should be publicly humiliated for stealing, ordered to pay back any gains they may have received along with a substantial penalty out of their personal finances, and then fired.

post #16 of 16
Quote:
Originally Posted by chadmatic View Post
 

 

There is no question that these guys are crooks and need to face some consequences, but prison isn't the answer.  Prisons should be reserved for only those who pose a physical threat to society.  These guys should be publicly humiliated for stealing, ordered to pay back any gains they may have received along with a substantial penalty out of their personal finances, and then fired.

 

Corporations are people, right? Therefore, they should be subject to the same penalties for breaking the law as regular people, including prison. Hey, it's only fair.

 

$30 million is such a nothing penalty. The regulators in the US are a total joke. With such piddling fines, no wonder companies like Google and Samsung continually break the law — there is no incentive for them not to.

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