Citigroup settles 'disabled' fees case
Citigroup settles 'disabled' fees case
By Ben White in New York
Copyright The Financial Times Limited 2006
Published: August 11 2006 03:00 | Last updated: August 11 2006 03:00
Citigroup yesterday agreed to pay $1.1m to settle charges that more than 100 of its brokers improperly obtained waivers of mutual fund sales fees for clients by claiming the clients were disabled.
In some cases, according to a complaint filed by industry regulator, the NASD, the clients thatCitigroup said were disabled were multi-million-dollar hedge funds.
In other cases, the NASD said Citigroup brokers claimed disability waivers for mutual funds sales by clients with no such ailments.
Some mutual funds allow investors to sell shares without paying a fee under certain circumstances, including death or disability.
According to the NASD, the Citigroup brokers would enter data into Citigroup's sales system claiming their clients had become disabled since buying mutual fund shares from an outsidecompany.
The NASD said the brokers would then ignore requirements from the outside mutual fund companies that they document thedisabilities.
Between 2001 and 2002,Citigroup brokers improperly entered waivers for hundreds of customers in connection with 2,419 mutual fund transactions totalling $47m. One broker allegedly entered disability claims for 80 per cent of his clients.
The regulator said it had taken action against fiveCitigroup brokers and was investigating others. It is also examining whether the behaviour took place at other financial institutions.
As is typical in such agreements, Citigroup neither admitted nor denied wrongdoing.
By Ben White in New York
Copyright The Financial Times Limited 2006
Published: August 11 2006 03:00 | Last updated: August 11 2006 03:00
Citigroup yesterday agreed to pay $1.1m to settle charges that more than 100 of its brokers improperly obtained waivers of mutual fund sales fees for clients by claiming the clients were disabled.
In some cases, according to a complaint filed by industry regulator, the NASD, the clients thatCitigroup said were disabled were multi-million-dollar hedge funds.
In other cases, the NASD said Citigroup brokers claimed disability waivers for mutual funds sales by clients with no such ailments.
Some mutual funds allow investors to sell shares without paying a fee under certain circumstances, including death or disability.
According to the NASD, the Citigroup brokers would enter data into Citigroup's sales system claiming their clients had become disabled since buying mutual fund shares from an outsidecompany.
The NASD said the brokers would then ignore requirements from the outside mutual fund companies that they document thedisabilities.
Between 2001 and 2002,Citigroup brokers improperly entered waivers for hundreds of customers in connection with 2,419 mutual fund transactions totalling $47m. One broker allegedly entered disability claims for 80 per cent of his clients.
The regulator said it had taken action against fiveCitigroup brokers and was investigating others. It is also examining whether the behaviour took place at other financial institutions.
As is typical in such agreements, Citigroup neither admitted nor denied wrongdoing.
posted by Carlos T Mock at 9:13 AM
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