Citigroup analyst fined for favouring four select clients

A former Citigroup equity analyst was fined more than £50,000 yesterday for disclosing details of an investment note to four of his clients, more than a week before the research was formally released into the market.

Roberto Casoni, the former head of Italian small-cap equities research at the bank, was fined £52,500 by the Financial Services Authority (FSA), only reduced from a proposed penalty of £75,000 because of his co-operation with the investigation.

The events took place in January last year when Mr Casoni was in the process of initiating coverage on Banca Italease, an Italian leasing and factoring bank. Having taken a different view on the bank's valuation from his analyst peers, Mr Casoni believed the stock provided investors with more than 50 per cent upside.

At the time, Banca Italease was trading at around €25 (£17). However, Mr Casoni had decided to initiate coverage with a "buy" recommendation and a share price target of €37.

On 12 January 2006, he emailed a fund manager who held a large position in the stock, asking him to consider his model for valuation of the bank. An email discussion followed, before the pair finally met on 20 January. Although Mr Casoni's research had been approved by Citigroup's internal stock steering committee that morning, it was not to be published to the wider market for three more days.

Mr Casoni also contacted two more fund managers on 13 January to discuss details of his research, and emailed a spreadsheet containing his calculations to a fourth client three days later. His note was not published to the wider market until 23 January after the market had closed. The shares moved up more than 1 per cent the following day.

The FSA criticised Mr Casoni for giving a small number of clients the opportunity to act on his research before the rest of the market had been given access to the information. However, the regulator added that, in the event, none of the five fund managers traded in the stock before the note was formally published.

Margaret Cole, the FSA's director of enforcement, said: "The FSA expects all individuals, in particular approved persons, involved in the production of research for publication to the markets to act properly to ensure the fair distribution of that research.

"This is fundamental to the maintenance of clean and orderly markets.

"Mr Casoni failed to observe proper standards of market conduct by deliberately disclosing his valuation methodology, his recommendation and target price to external parties prior to its publication.

"By doing so Mr Casoni allowed the recipients the opportunity to pre-empt the conclusions of the published research ahead of the rest of the market."

The regulator acknowledged that Mr Casoni had no intention of manipulating the share price of Banca Italease, and that he made no financial gain from his misconduct. It revealed that Citigroup had brought the matter to the FSA's attention.

Mr Casoni left the company shortly after the incident in February last year.