The Financial Industry Regulatory Authority fined Citigroup Global Markets (C) $3.5 million for issuing inaccurate mortgage quality data on subprime residential mortgage-backed securitization deals.

Finra claimed in a public statement Tuesday that Citi posted inaccurate RMBS data on its website and left the material unchanged for five years.

Finra issues fines in cases like these since investors utilize data from firms like Citi to inform their selection of which securities, or RMBS deals, to acquire. Citigroup did not admit or deny the charges, but consented to an entry of Finra's findings, the regulator said. A spokesperson for the bank said, "We are pleased to put this matter behind us."

The data on underlying mortgages is critical to the success of RMBS deals since a mortgage holder's failure to make a payment has an adverse effect on investors who bought into a pool of loans.

"Citigroup posted data for its RMBS deals that it should have known was inaccurate; and even after they learned that the data was inaccurate, Citigroup did not correct the problem until years later," said Brad Bennett, executive vice president and chief of enforcement for Finra.

Finra said in the period stretching from January 2006 to October 2007, Citi posted inaccurate mortgage performance information on its website. The information stayed on the site until early May even though the firm allegedly had some indication that the information was incorrect, Finra said.

"On multiple occasions, Citigroup was informed that the information posted was inaccurate yet failed to correct the data until May 2012," the regulatory agency said. "For three subprime or Alt-A securitizations, the firm provided inaccurate mortgage performance data that may have affected investors assessment of subsequent RMBS."

Finra also claims Citi did not supervise all MBS pricing since it lacked the procedures to verify the pricing of these types of transactions.

"Also, Citigroup failed to maintain required books and records. In certain instances, when it re-priced mortgage-backed securities following a margin call, Citigroup failed to maintain a record of the original margin call, document the supervisory approval or demonstrate that the revised price was applied to the same position throughout the firm."