Banks slapped with $845K in fines over Vonage IPO
Three investment banks have been fined hundreds of thousands of dollars for their poor communications to clients about circumstances surrounding the Vonage IPO in 2006. Citigroup, UBS AG, and Deutsche Bank AG will have to pay a total of $845,000 in fines and restitution assessed by The Financial Regulatory Authority (FINRA), according to a Reuters report.
The FINRA said the banks, which led the underwriting of Vonage's disastrous IPO, improperly outsourced communications with clients about the purchase of Vonage shares. An outside firm told bank clients that purchased Vonage shares that they had not, and in the interim before the banks could remedy the situation and inform the new Vonage shareholders of their buy, the shares tanked from their $17 initial valuation. FINRA ruled that the banks were liable for the money these individuals lost and fined them for their negligence; Citigroup must pay as much as $250,000 in restitution and $175,000 in fines; UBS must pay as much as $118,000 in restitution, and $150,000 in fines; and Deutsche Bank must pay as much as $52,000 in restitution and $100,000 in fines.
As the Reuter's article deftly notes, Vonage shares closed at $1.44 on Monday.
- see the Reuter's article hosted at The New York Times here