Securities Fraud Blog | Find out if your broker is liable for your losses

TAG | broker failure to disclose risks

Apr/11

19

Citigroup Inc., Ordered by FINRA to Pay $51 Mill to Investors

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In an April 12, 2011, article from InvestmentNews.com states that Citigroup Inc., the third-biggest U.S. bank, was ordered to pay more than $51 million to a group of investors in its MAT and ASTA municipal-bond hedge funds, which regulators began examining more than two years ago.

The Financial Industry Regulatory Authority arbitrators, which oversees U.S. brokerages, includes $17 million in punitive damages, according to a copy of the panel’s decision on Finra’s website. It’s the third-largest arbitration award by Finra and predecessor NASD since 1988, according to Securities Arbitration Commentator Inc., a Maplewood, New Jersey-based legal publishing and research firm.

The SEC or U.S. Securities and Exchange Commission has questioned former Citigroup brokers as part of a probe into whether the bank misled investors about risks associated with certain debt funds, people familiar with the matter said last year. Citigroup disclosed the inquiry into the MAT and ASTA funds in August 2008, after the funds tumbled to values ranging from 10 cents to 60 cents on the dollar amid souring credit markets early that year.

“We are disappointed with the decision, which we believe is not supported by the facts or law, and we are reviewing our options,” Danielle Romero-Apsilos, a spokeswoman for the New York-based bank, said in an e-mailed statement.

The FINRA arbitrators didn’t explain the reasoning behind their ruling. They ordered Citigroup to pay $21.7 million to patent attorney Gerald Hosier, $8.5 million to Brush Creek Capital LLC, which is owned by Hosier’s family, and $3.9 million to venture capitalist Jerry Murdock Jr., the ruling shows. Among their claims, plaintiffs had accused the bank of breaching a fiduciary duty, contract violation, fraud, breaking Finra rules and supervisory failures.

It was noted in the InvestmentNews.com article that Citigroup said in a regulatory filing last month that “several” investors in funds including MAT and ASTA had filed lawsuits and arbitration claims against the bank, and that many of the disputes are already resolved. The SEC is examining the marketing, management and accounting treatment of the funds, the company said, adding that it is fully cooperating.

If you feel you have been an alleged victim of  Citigroup, Inc., or it’s brokers, or you have found yourself in a similar situation, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Apr/11

8

FINRA Fines and Suspends Eric Damien Kallies

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The following was obtained on FINRA’s website:

Eric Damien Kallies (CRD #4753714, Registered Representative, Waunakee, Wisconsin)

submitted a Letter of Acceptance, Waiver and Consent in which he was fined $15,000 and suspended from association with any FINRA member in any capacity for 30 business days. The fine must be paid either immediately upon Kallie’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Kallies consented to the described sanctions and to the entry of findings that he executed purchases of exchange-traded fund (ETFs) in a managed joint account of public customers without the customers’ knowledge or consent, and without having obtained the customers’ prior written authorization to exercise discretion and his firm’s prior written acceptance of the account as discretionary. The findings stated that Kallies made a presentation consisting of several slides to the customers in connection with an investment strategy program he was recommending and was considered “sales literature.” 

The findings also stated that Kallies made the presentation without first obtaining approval from the appropriate registered principal of the firm, and it was never filed with FINRA within 10 business days of its first use. The findings also included that the presentation generally failed to disclose the risks of investing in the securities that were discussed, failed to disclose the general risks associated with investing in mutual funds and ETFs, and failed to disclose the heightened risk of investing in inverse types of ETFs.

FINRA found that the absence of certain disclosures resulted in the presentation not being fair and balanced and not providing the investor with a sound basis for evaluating facts in regard to a particular security or service, and the slides contained unwarranted and/or misleading information. FINRA also found that charts in some slides failed to include the total annual fund operating expense ratio, a prospectus offer and standardized average annual total returns for one, five and ten years; rather, they included the annualized rates of return, which is considered non-standardized performance and must be accompanied by the standardized performance listed. In addition, FINRA determined that the charts in some slides failed to include the performance disclosures required by SEC Rule 482(b)(3); these disclosures generally require that the sales material disclose that the performance data quoted represents past performance, that past performance does not guarantee future results and that performance may be lower or higher.

The suspension is in effect from February 7, 2011, through March 21, 2011. 

(FINRA Case #2009016654401)

If you feel you have been a victim of these alleged fraudulent schemes of  Eric Damien Kallies, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

 

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