Citigroup to Pay $18 Million to Settle Charges It Overbilled Clients
January 26 2017 - 2:17PM
Dow Jones News
By Austen Hufford
Citigroup Inc. will pay $18 million to settle Securities and
Exchange Commission allegations that it overbilled investment
advisory clients and lost client contracts.
A Citigroup spokeswoman said the bank is pleased to have the
matter resolved.
The SEC alleges that at least 60,000 clients were overcharged
about $18 million in fees because Citigroup charged clients higher
rates than the ones that were negotiated. The bank allegedly didn't
confirm that proper billing rates were entered into its computer
systems over a 15-year period from 2000 to 2015.
The regulator also says that Citigroup allegedly lost contracts
for 83,000 advisory accounts opened between 1990 and 2012, and
therefore couldn't check whether clients were being billed at the
negotiated rates.
Advisers are required by law to preserve written client
contracts in an easily accessible place for at least five
years.
Citigroup has already paid back some of the fees. As part of the
settlement, Citigroup is censured and will monitor advisory fee
overbilling errors for three years. The firm will pay $3.2 million
in excess fees related to the missing contracts, $800,000 in
interest and a $14.3 million penalty.
Some of the client accounts were held in a joint venture. After
the financial crisis, Citigroup and Morgan Stanley combined their
wealth-management units in a joint venture called Morgan Stanley
Smith Barney. Citigroup sold its remaining stake in the unit to
Morgan Stanley in 2013.
Citigroup settled similar accusations brought by the New York
Attorney General's Office two weeks ago. Morgan Stanley paid $13
million in an SEC fine earlier this month over similar
accusations.
Banks have come under scrutiny related to their dealings with
customers after Wells Fargo & Co. was slapped with a $185
million fine last September for opening as many as two million
deposit and credit-card accounts without customers' knowledge.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
January 26, 2017 14:02 ET (19:02 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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