Reuters – The NASD ordered Citigroup Inc. to pay $1.12 million over a scheme by more than 100 brokers to obtain mutual fund sales charge waivers by falsely claiming their customers, including hedgefunds, were disabled.
Citigroup Global Markets Inc. will pay a $400,000 fine for supervisory and record-keeping violations and reimburse $715,000 to mutual fund companies, the NASD said on Thursday.
The NASD has taken disciplinary action against five Citigroup brokers, including one it barred from the securities industry, and said it is investigating several others.
It found more than 2,400 improper waivers in transactions by hundreds of customers with over two dozen fund companies.
“Citigroup missed the red flags,” said James Shorris, the NASD’s head of enforcement, in an interview.
“We were deeply disappointed because it was aware of similar problems based upon a 1997 disciplinary action and didn’t take effective steps to prevent a recurrence,” he added. “One of the particularly stunning facts is it submitted (waivers) for hedge funds, which was inexplicable.”
