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Home > Investor News > FINRA Panel: Citi to Pay Nearly $1.5M Over Rochester Municipal Fund

FINRA Panel: Citi to Pay Nearly $1.5M Over Rochester Municipal Fund

An arbitration panel of the Financial Industry Regulatory Authority (FINRA) has ruled that Citigroup Global Markets Inc. must pay nearly $1.5 million to an investor who says the brokerage misrepresented certain facts and risks associated with her investment in a mutual fund.

The investor purchased Citi’s Rochester Municipal Fund in 2007. According to documents from FINRA’s Sept. 5 ruling, the fund was represented as “safe” even though it consisted mainly of risky derivative securities.

“This is an important win for our client,” says Steven B. Caruso of Maddox Hargett & Caruso, P.C., which provided legal counsel for the investor. “It once again sends a clear message to Citigroup that you cannot mislead investors, irrespective of their wealth, with toxic and speculative investments that are represented to be safe and secure.”

In addition to the Rochester Municipal Fund arbitration award, Maddox Hargett & Caruso has served as co-counsel in numerous FINRA arbitration proceedings involving Citigroup’s ASTA-MAT municipal arbitrage product. To date, the firm has successfully recovered more than $60 million for clients and their ASTA-MAT arbitration claims.

The ASTA-MAT funds lost some 90% of their value beginning in 2008. The funds, which investors say had been marketed to them as less risky and more profitable than other fixed-income and municipal investments, were highly leveraged and borrowed approximately $10 for every $1 raised. As the ASTA-MAT funds began to lose money, Citigroup managers allegedly continued to push the products to investors, while employing highly speculative investment strategies.

Last year, Maddox Hargett & Caruso provided co-counsel for a case resulting in the largest FINRA arbitration award ever levied against a major Wall Street brokerage firm on behalf of individual investors. Specifically, a Denver arbitration panel found Citigroup Global Markets liable for $54 million in damages, including $17 million of punitive damages, in claims involving its ASTA-MAT municipal arbitrage product.

In addition, the award held Citigroup liable for the investors’ expert witness fees, certain other arbitration-related expenses and all of the FINRA forum fees associated with the administration of the arbitration proceeding.

Maddox Hargett & Caruso continues to investigate FINRA arbitration claims on behalf of investors who suffered losses in both the Rochester Fund Municipal Fund and the ASTA-MAT municipal arbitrage product.


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