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Home > Blog > Citigroup Found Liable in FINRA Claim Involving Rochester Municipal Fund

Citigroup Found Liable in FINRA Claim Involving Rochester Municipal Fund

A New York arbitration panel of the Financial Industry Regulatory Authority (FINRA) has ordered Citigroup Global Markets, Inc. to pay compensatory damages of more than $1.4 million to an investor who suffered losses tied to a municipal bond fund that was marketed as safe and secure but in reality contained risky derivative securities.

The investor purchased Citi’s Rochester Municipal Fund in 2007 after Citigroup recommended it as a safe alternative to her municipal bond fund investments and one that would pay slightly more interest. Instead, the Rochester Municipal Fund consisted mainly of toxic and speculative derivative securities whose value is dependent on the performance of underlying assets.

“Through the issuance of this arbitration award, our client not only received a substantial portion of the losses that she sustained as a result of her investment in the Rochester Municipal Fund, but the arbitrators also further held Citigroup liable for 9% of statutory interest on her principal loss, as well,” says Maddox Hargett & Caruso’s Steven B. Caruso, who served as counsel for the investor.

The case shines an important spotlight on the questionable sales practices of brokers and the impact those practices can have on investors regardless of their wealth or financial sophistication.

“Wealthy investors in particular are often asked to defend their investment choices by brokerage lawyers in arbitration cases, because of the false assumption that they must have a deeper understanding of what they are buying than average investors, said Caruso in a Sept. 12 article by Reuters. “Wall Street often mistakenly equates wealth with financial know-how.”

In addition to this FINRA arbitration award, Maddox Hargett & Caruso, P.C. has served as co-counsel in numerous other FINRA arbitration proceedings involving Citigroup’s ASTA-MAT municipal arbitrage products. To date, investors in those cases have been awarded damages of more than $60 million.

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