Citigroup misled its representatives who sold the firm’s MAT/ASTA municipal arbitrage hedge funds, and arbitrators are placing the blame squarely on the firm, according to a September 5 article by Bruce Kelly in InvestmentNews (“Arbitrators: B-Ds Kept Brokers in the Dark on Private Deals”).
Brokers at Citigroup’s former brokerage unit, Smith Barney, sold more than $2 billion of the MAT/ASTA funds as low-risk, fixed-in-come alternative investments, beginning in 2002. Those funds lost between 30% and 100% of their value, according to the article.
Last month, a Financial Industry Regulatory Authority (“FINRA”) arbitration panel specifically found that Citigroup Global Markets Inc. was liable for “negligent management” of the MAT/ASTA funds, and ordered the firm to pay $1.82 million in damages.
The arbitrators’ finding of mismanagement by Citigroup is an indication of the severity of the problem at the firm. There were tons of conflicts in these products and how they were offered; financial advisers were the tools used to sell these products, and they didn’t get the full scoop on how they were really being managed. The blow-up was due to management, who then passed it along to the advisers.
“The best advisers at Smith Barney sold MAT and ASTA to their best clients and wound up feeling totally betrayed by Smith Barney,” an industry recruiter was quoted as saying, adding: “In terms of a loss of faith in the firm, this is as big as anything.”
J. Boyd Page, senior partner at Page Perry in Atlanta, said: “The financial advisors who sold MAT/ASTA Funds to their clients trusted Citigroup to honestly inform them about the nature and risks of the funds and to manage the funds within established guidelines. That trust was betrayed. Based on our analyses and evaluations of the facts, we have made a conscious decision not to name financial advisors in these cases.” “The brokers will not be named in MAT/ASTA arbitrations filed by our team,” he added.
Page Perry is investigating and pursuing MAT/ASTA municipal arbitrage cases against Citigroup and its affiliates. Page Perry has extensive experience in prosecuting MAT/ASTA cases all over the country. For further information, please contact us.