Finra Orders Citigroup To Pay Hedge Fund Investors $550,000

Jun 2 2010 | 9:38am ET

Regulators have ordered Citigroup to make whole hedge fund investors who placed money in a fixed-income municipal arbitrage product—the MAT 3 Municipal Arbitrage Fund—which was sold by the banking giant.

The Financial Industry Regulatory Authority has ordered the bank to pay more than $550,000 to the investors, saying the bank misled both its own brokers as well as its investors regarding the risks posed by the product, according to the Wall Street Journal.

"We are disappointed and disagree with this decision as it is inconsistent with other panels, which have dismissed similar claims," a spokesman for Citigroup told the WSJ

Citigroup created the municipal arbitrage product in 2006 and marketed it as having the volatility of the Lehman Brothers Aggregate Bond Index. But according to lawyers for the hedge funds—which were not named—the product was 2.5 times more volatile than the S&P 500 and 7.8 times more volatile than a traditional portfolio of municipal bonds.


In Depth

'Smart Beta' Funds In Regulators' Sights, Hedgies May Be Next

Mar 26 2015 | 11:11am ET

Funds that mimic strategies used by active managers for a fraction of the cost could...

Lifestyle

Study: Both Marriage and Divorce Lead to Negative Hedge Fund Performance

Mar 25 2015 | 6:51pm ET

Trouble at home leads to trouble in the market for fund managers, according to researchers...

Guest Contributor

The Life Settlement: Yield For The Investor And Cash For The Consumer

Mar 31 2015 | 6:48am ET

Investors are languishing in a yield-starved, low-interest rate environment, looking...

 

Sponsored Content

    Mar 9 2015 | 6:35am ET

    Kelly RodriquesKelly RodriquesAs more investors look to diversify, many are beginning to use retirement funds to invest in alternative assets such as private equity and real estate. Kelly Rodriques, CEO & President of PENSCO Trust Company, explains how companies can connect with those looking to use their retirement accounts in a different way. Read more…

Editor's Note