Citigroup Fails at Best Execution of Orders Class Action

Citigroup Global Markets, Inc. acts as a broker for other companies, buying and selling securities in the markets. The complaint for this class action alleges that Citigroup did not follow instructions from one of its clients to achieve best execution of two large orders without unduly affecting prices. The complaint claims that Citigroup’s ignoring of its obligations cost investors $70 million.

The plaintiff in this action is Loomis Sayles Trust Company, LLC (LSTC), the trustee for the LSTC Collective Trust for Employee Benefit Plans, which maintains certain investment funds. Its investment advisory firm, Loomis, Sayles & Company, LP (Loomis), maintains Growth Equity Strategies (GES) portfolios.

The companies together placed various trading orders with Citibank on March 18, 2022. The date was significant in that it was a triple- or quadruple “witching day,” when the market has more liquidity than usual.

The trades were designed to rebalance the GES portfolios. Among them were the two at issue in this case, called the Affected Orders: a buy order for 780,856 shares in Shopify (SHOP) and a sell order for 5,236,139 shares in Colgate-Palmolive Company (CL).

The orders included specific instructions. The complaint alleges, “LSTC and Loomis directed Citigroup … to conduct appropriate market liquidity analysis and use its discretion to execute the March 18 Orders in a manner that would not materially impact the prices at which the securities were purchased or sold.” This is because large buy or sell orders can cause the price of a stock to go down or up. To ensure that it got the best prices possible, the complaint says, “LSTC and Loomis expressed that the Affected Orders did not need to be completed that day in the event that Citigroup determined that there was insufficient liquidity to complete them without materially impacting prevailing market prices.”

But the complaint alleges that Citigroup did not follow these orders. Instead, the complaint says, it did not do any meaningful liquidity analysis, put all of the Affected Orders into the closing auction for the day, and, flooding the market, “caused artificial price dislocation[.]”

Citigroup still had options to improve the situation, but the complaint claims it did not use them: It “made no attempt to cancel or reduce the size of the Affected Orders pursuant to New York Stock Exchange (‘NYSE’) rules; and failed to involve the NYSE and/or the Designated Market Maker … to suspend the auction and supplement it with more liquidity to ensure a reasonable closing price.”

According to the complaint, the duty of a broker to obtain best execution for its clients is a common-law duty that was recognized even before the establishment of federal securities laws.

The class for this action is LSTC and Loomis clients who participated in the trades of SHOP and/or CL executed by Citigroup on March 18, 2022 and who were damaged as a result of Citi’s failure to execute the trades consistent with LSTC and Loomis’s instructions and Citi’s duty of best execution.

Article Type: Lawsuit
Topic: Contract
Tags: Breach of Contract, Breach of Fiduciary Duty, Investment Losses, Investments