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CITI RESEARCH CONFLICTS MANAGEMENT STATEMENT
1. Purpose
1.1. This document has been created to:
(1) disclose organisational and administrative arrangements for the identification and management of potential conflicts of interests with respect to Citi Research, and
(2) provide clients with a summary of Citi’s respective policies and procedures.
1.2. The publication of this summary of our policies is not intended to create any third-party rights or duties between Citi and such third-parties that would not exist in the absence of such publication, or to form part of any contract with any client or third-party. Detailed internal policy documents and operating procedures may not be fully represented in the summary that appears below.
2. Overview
2.1. Citi Research is committed to providing high-quality, objective, and unbiased research to our clients. In general, these policies apply globally because basic principles of research independence are integral to our global research product regardless of where it is distributed. However, policies may vary according to local law, regulation or custom. Our objective is to maintain the highest professional standards and principles in publishing research. The interests of our investing clients must always come first, and these policies are intended to ensure that those interests are well served.
2.2. To this end, we have policies in place to identify, consider and manage potential conflicts of interest and protect the integrity of our relationships with investing and corporate clients. Employee compliance with these policies (in addition to continuing training on their content) is mandatory. In addition, employees may not do indirectly that which they are prohibited from doing directly under these policies.
3. Identification of Conflicts
3.1. Citi’s senior management has considered the potential conflicts of interest arising out of the provision of research and determined that these policies are sufficient to manage these potential conflicts. In particular, these policies are designed to consider potential conflicts between recipients of our research and our corporate finance clients (including issuers of investments covered by our research), our investment clients (including sales and trading customers), the trading and investment banking activities of Citi and affiliates, and the personal interests of our officers and employees. References to investment banking in this document include but are not limited to departments within Citi that advise corporate clients with respect to capital raising activities and/or mergers and acquisitions activities.
3.2. Despite procedures and policies for the identification and management of potential conflicts, Citi Research may not be aware of all such potential conflicts because it may not be familiar with all the interests of the recipients of research and other clients.
3.3. Mechanisms for identifying and managing potential conflicts include:
(1) Internal guidance and training regarding the identification of possible conflicts before they arise.
(2) Procedures to ensure that potential conflicts are escalated to the appropriate level within Citi.
(3) Legal monitoring of potential conflicts arising out of the publication of research in the period before, during and after investment banking transactions.
(4) Internal arrangements (including physical separation, Chinese walls and other information barriers) for regulating the flow of information between and within business areas.
(5) Editorial guidelines and procedures for supervisory and compliance review of research prior to publication.
(6) Employee Certification protocols to disclose personal conflicts and other personal information that could conflict with the production of independent investment research.
4. Structural Separation
4.1. As of November 2023, Citi Research is part of the Client Organisation. The Client Organisation supports Citi’s core businesses (Services, Markets, Banking and International, Wealth and U.S. Personal Banking) by providing client services such as investment research, thought leadership, marketing, client coverage and analytics, and credit management.
4.2. The heads of Client and Citi’s core businesses each report into the Chief Executive Officer of Citigroup.
4.3. Citi Research is physically separated from Banking by
being located on different floors or segregated areas of the same floor subject
to controls required by Legal/Compliance. Citi Research is also physically
separated from other areas of the Firm to the extent advised by
Legal/Compliance in light of local regulations and interpretations. Citi
Research personnel must also use computer drives and research authoring systems
that are not accessible by Banking or Markets employees.
5. Supervision and Remuneration of Citi Research Analysts
5.1. Compensation of Citi Research analysts is structured to align the interests of research analysts with Citi Research’s investing clients and to avoid any incentive inconsistent with the provision of impartial research. As such, compensation of research analysts is determined exclusively by Citi Research management and Citi’s senior management (excluding anyone from Banking or anyone who performs sales, trading or clearing activities or their direct supervisors) and is not linked to specific transactions or recommendations.
5.2. Citi Research analyst compensation is based on established criteria that include the quality and accuracy of the analyst’s research and analysis. No Research analyst compensation may be based upon specific investment banking transactions or contributions to the Banking business or upon specific trading transactions or contributions to Markets’ trading or clearing business. However, compensation may relate to the revenues or results of Citi as a whole (including Banking and Markets).
5.3. The Research budget and allocation of expenses is determined by Research Management and Citi’s senior management (with no involvement or input from Banking or, for certain elements, from senior management engaged in trading activities). Citi Research budgets shall be determined without regards to specific revenues or results derived from Banking, though revenues and results of the firm as a whole may be considered in determining Citi Research budget and the allocation of Citi Research expenses.
5.4. Citi Research analyst feedback is controlled in order to prevent improper influence from areas of the firm where a conflict may exist. For example, research analysts classified as “CFTC Derivatives Research Analysts” must not receive feedback from Citi’s business trading unit, and Banking is not permitted to provide analyst feedback.
5.5. All Citi Research reports must carry a certification from the research analyst that the views expressed accurately reflect the analyst’s personal views about any and all of the subject issuer(s) or securities and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or view(s) in that report.
6. Involvement of analysts in other activities
6.1. Citi Research analysts are not permitted to participate in efforts to solicit investment banking business or to participate in any pitches to prospective investment banking clients.
6.2. Citi Research analysts are not permitted to participate in or attend any company or investment banking sponsored road shows related to a public offering or other investment banking transaction.
6.3. Interactions between Citi Research and Banking are permitted only if they do not compromise Citi’s commitment to research independence. Email and certain other electronic communications between Banking and Equity Research are blocked, subject to limited exceptions.
6.4. Citi Research analyst participation in the capital formation process may be required during several phases of the process, including assessing potential candidates for transactions; vetting of identifiable transactions; addressing Citi internal review committees; and educating investors and sales.
6.5. Interactions between research analysts and corporates, including private companies, are a legitimate and necessary part of an analyst’s ordinary course work to understand their area of coverage (including the wider sector).
6.6. Nonetheless, to comply with regulatory requirements that exist in certain regions, Citi research analyst interactions with issuers, their advisers and representatives may be restricted in order to further mitigate any perceived impairment to a research analyst’s independence during the capital formation process.
6.7. It is in the interest of Citi Research’s investing clients to have independent research analysts comment on potential candidates for transactions and review identifiable transactions to assess the merits of such transactions. The purpose of research vetting is to allow equity research analysts to assess the investment merits and risks; assist Citi in determining the appropriateness of transactions for investing clients; and provide input to Citi’s overall view of the proposed transaction.
6.8. Banking may not use research to win banking business and are only permitted to provide research to banking clients in limited circumstances, in order to maintain research independence.
6.9. Citi Research analysts are not permitted to collaborate with Markets on the production of research reports or market commentary.
7. Avoiding Inappropriate Influences
7.1. Citi Research management independently makes research coverage decisions (e.g., initiating, transferring, or terminating coverage). Banking may not provide any input on or discuss the coverage of individual companies with Research. Generally, Citi Research intends to provide coverage for all equity securities underwritten by Citi (regional nuances may exist, for example depending on the role Citi takes in the transaction). Notwithstanding the foregoing, Research Management will have final discretion and responsibility with respect to all coverage decisions including taking into account, among other things, whether sufficient capacity exists to provide coverage.
7.2. Non-research personnel must never attempt to influence a research analyst’s rating or opinion or any other contents of a research publication.
7.3. Neither Citi Research nor any non-Citi Research personnel may offer or accept any inducement to produce favourable research or a specific rating or price target.
7.4. Citi Research analysts shall not provide draft, written research or models to any non-Citi Research personnel (including the subject company) prior to publication, except as expressly permitted by Legal/Compliance solely for the purpose for fact checking.
7.5. All Citi employees must adhere to policy restrictions and requirements regarding personal investment activities that have been reasonably designed to prevent conflicts of interest arising between the publication of research and personal investment activity. Such measures include (but are not limited to) the pre-disclosure of trading accounts, monitoring and surveillance on certain personal investment activity, pre-approval requirements to trade certain instruments, and disclosure of positions that may create the perception of a conflict of interest with the research analyst’s investment research coverage.
7.6. All Citi employees must seek approval for outside directorships and business interests from business management and Compliance. Such disclosures will be reviewed for actual and perceived conflicts of interest with the research analyst’s investment research coverage.
8. Means and Timing of Publication
8.1. Citi
Research broadly and simultaneously disseminates its research content to the
Firm’s institutional and retail clients via the Firm’s proprietary electronic
distribution platforms (e.g., Citi Velocity and various Global Wealth
platforms).
8.2. As
a convenience, certain, but not all research content may be distributed through
third-party aggregators. Clients may receive published research reports by
email, on a discretionary basis, and only after such research content has been
broadly disseminated.
8.3. Certain research is made available only to institutional investors to satisfy regulatory requirements.
8.4. Sales and Trading Staff are not permitted to produce “research” (broadly meaning written communications about a security, derivative or issuer including a recommendation and a substantive analysis of the risk, rewards and opportunities present in a security or detailed analysis of issuers operations or projected earnings growth) or hold themselves out as research analysts. Written materials produced or distributed by sales and trading may not therefore contain formal ratings, company or issuer specific earnings, projections or financial forecasts, and materials and formats must be clearly distinguished from Citi Research and labelled accordingly.
9. Client communications and ongoing service
9.1. In addition to published research, Citi Research analysts are permitted to have certain communications with clients, in line with internal policies. Such communications are generally required to be consistent with an analyst’s published research. A research analyst may not communicate matters that could be perceived to be of general client interest unless they have previously published it.
9.2. Citi Research analysts are prohibited from disclosing the proposed timing or content of research prior to its public distribution.
9.3. Except as described above in the context of fact checking investor education research, Citi Research analysts or other employees may not communicate the substance of any research prior to publication either internally (other than to the necessary Citi Research personnel and Legal/Compliance) or outside Citi. Research analysts are permitted to verify factual information with the subject company only. Additional disclosures may be made accordingly.
9.4. Client confidential information may only be shared on a need-to-know basis and to better serve the particular client.
9.5. The level and types of services provided by Citi Research analysts to clients may vary depending on various factors such as the client’s individual preferences as to the frequency and manner of receiving communications from research analysts, the client’s risk profile and investment focus and perspective (e.g. market-wide, sector specific, long term, short-term etc.), the size and scope of the overall client relationship with Citi and legal and regulatory constraints, and any research-client agreement that may be required under local regulation.
10. Disclosures
10.1. For important disclosures regarding Citi Research, including disclosures with respect to any issuers, please refer to the Citi Research disclosure website at https://www.citivelocity.com/cvr/eppublic/citi_research_disclosures
10.2. These disclosures are principally made to disclose actual or perceived conflicts of interest at the individual and firm level, as required by numerous regulations globally. Such disclosures are made notwithstanding the structural and procedural controls that have been outlined within this document (i.e., such disclosure is not made as a mechanism for controlling actual or perceived conflicts of interest under the MIFID II Article 34).
10.3. Where it is disclosed on a research report that Citigroup Global Markets Inc or its affiliates beneficially owns a specified percentage of any class of common equity securities of an issuer, this position reflects information available as of the prior business day. The computation of beneficial ownership of securities is based upon the same standards used to compute ownership for purposes of the reporting requirements under Section 13(d) of the US Securities Exchange Act of 1934.
10.4. We regard ourselves to have a significant financial interest in the issuer if as of the last day of the month immediately preceding the date of publication of the relevant report (or the end of the second most recent month if the relevant report is less than 20 business days after the end of the most recent month) our Corporate and Investment Banking business has: (1) an aggregate net position (long or short) greater than USD25mm in debt securities, and credit derivatives referencing debt securities, issued or backed by the credit of the issuer; and/or (2) an aggregate exposure greater than USD25mm in loans and undrawn commitments to the issuer or to the group of companies with whom, via the issuer, we have a lending relationship.
10.5. Where it is disclosed on a research report that one of the subject companies beneficially owns or controls a specified percentage of any class of common equity securities of Citigroup Inc, this position reflects information as available at the end of the most recent quarter date. The information is sourced from Bloomberg who do not guarantee the data’s accuracy or completeness.
10.6. Where it is disclosed on a research report that Citigroup Global Markets Inc. or its affiliates has acted as manager or co-manager for a subject company, this may also include acting as a placement agent for a private investment in a public entity (PIPE). |
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