Morgan Stanley, Citigroup Settle Misleading Claims Charges in Forex Trading Program
January 24 2017 - 2:52PM
Dow Jones News
By Austen Hufford
Morgan Stanley and Citigroup Inc. will each pay nearly $3
million to settle Securities and Exchange Commission charges that
they falsely advertised a foreign-exchange trading program they
sold to investors.
Representatives of both firms pitched a foreign-exchange trading
program called "CitiFX Alpha" to Morgan Stanley customers from
August 2010 to July 2011. The SEC alleges that during their
presentations, customers weren't told that they could be placed
into the program using more leverage than advertised, and that
markups would be charged on each trade.
The two banks didn't admit or deny the findings. Spokeswomen for
both companies said they are pleased to have the matter
settled.
"Investors simply cannot be sold investments based on
disclosures that are inaccurate or incomplete," Eric Bustillo,
director of the SEC's Miami office, said.
The SEC says the past performance history and risk metrics
presented assumed the accounts were fully collateralized, meaning
the amount traded was equal to how much was in the account, and
that no markups would be charged on trades. The SEC says that
neither assumption was true.
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. At the time of the allegations,
Citigroup held a 49% stake in the unit.
The two banks each agreed to pay back $624,458.27, interest of
$89,277.34 and a fine of $2.3 million, for a combined total of $5.9
million.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
January 24, 2017 14:37 ET (19:37 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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