A U.S. regulator ordered Citigroup Inc, UBS AG and Deutsche Bank AG to pay up to $845,000 in fines and restitution because of communications breakdowns related to the 2006 initial public offering of Vonage Holdings Corp.
The Financial Industry Regulatory Authority said the banks, which were lead underwriters for the IPO, failed to properly supervise the outsourcing of communications with customers about Vonage, an Internet-based calling company.
FINRA said when an outside company made an error that caused some customers who received IPO shares to be told they had not, the banks were unable to promptly fix the problem.
As a result, by the time customers learned several days later that they had gotten shares, Vonage's share price had fallen significantly. FINRA said the customers were nonetheless required to pay the higher $17 per share IPO price, and suffered losses when they later sold the shares.
Citigroup was fined $175,000 and ordered to pay up to $250,000 in restitution to 284 potentially eligible customers. UBS was fined $150,000 and ordered to pay up to $118,000 to 126 potential customers. Deutsche Bank was fined $100,000 and ordered to pay up to $52,000 to 59 potential customers.
None of the banks admitted wrongdoing.
FINRA said it regulates nearly 4,800 brokerages.
Vonage shares closed Monday at $1.44.
(Reporting by Jonathan Stempel)