SEC exacts $18.3M from Citigroup for overbilling advisory clients
Citigroup Global Markets has agreed to pay $18.3 million to settle charges with the SEC that it overbilled thousands of investment advisory clients and misplaced many of their advisory contracts.
At least 60,000 clients were overcharged approximately $18 million in unauthorized fees because Citigroup failed to confirm the accuracy of billing rates entered into its computer systems in comparison to fee rates outlined in client contracts, the SEC said in an announcement on Thursday.
Citigroup also improperly collected fees during time periods when clients suspended their accounts, the SEC said. The billing errors occurred over a 15-year period.
The SEC rebuked Citigroup for not taking the necessary precautions to ensure clients were billed in a manner consistent with their advisory agreements. "Advisory clients have every expectation that the fees charged by their financial adviser reflect the negotiated rate," Andrew Calamari, director of the SEC's New York regional office, chided Citi in its announcement.
Danielle Romero-Apsilos, a spokeswoman for Citi International, said the firm was pleased to have the matter resolved.
Citigroup Global Markets paid a $1 million penalty to New York State for overcharging more than 47,000 customers. It will also reimburse the customers.January 12
The firm admitted to wrongdoing, saying the incomplete trading data was due to a computer coding error.July 13
The brokerage firm processed a number of securities transactions that facilitated conversions of foreign currency from or into U.S. dollars, FINRA claimed.December 27
The agreement comes two weeks after Citigroup settled similar charges with the New York Attorney General's office. The firm agreed to pay a $1 million penalty to the State of New York and reimburse customers for the fees it overcharged them, plus interest.
The SEC scolded Citigroup for misplacing the contracts for approximately 83,000 advisory accounts opened from 1990 to 2012, saying that without them Citigroup could not properly validate whether the fee rates negotiated when the accounts were opened were the same fee rates being billed to the clients. It estimated that Citigroup received approximately $3.2 million in excess fees from advisory clients whose contracts were lost.
As part of the settlement, Citigroup agreed to pay a $14.3 million penalty and $3.2 million in disgorgement of the excess fees collected due to the missing contracts, plus $800,000 in interest. It also agreed to undertakings related to its fee-billing practices.