Citigroup Global Markets Inc. has agreed to pay more than $15 million to settle charges that a group of its financial advisors misled BellSouth employees during dozens of seminars and meetings between 1994 and 2002.
Citigroup agreed to pay a fine of $3 million to NASD, as well as more than $12.2 million in restitution to more than 200 former employees of BellSouth. According to NASD, from 1994 to 2002, financial advisers at a Charlotte, N.C., branch--five of whom were disciplined and fined a total of $295,000--held more than 40 seminars with BellSouth employees in which the advisors gave BellSouth employees misleading advice to retire early by cashing out of and reinvesting their pensions and 401(k)s.
NASD charged Citigroup with failing to adequately supervise this team of brokers, who, said James S. Shorris, NASD executive vice president and head of enforcement, in a press release, “used misleading documents that made exaggerated and unwarranted projections of future earnings without fully explaining the risks involved “
According to NASD, the brokers in the Charlotte office conducted the seminars without obtaining approval for either the meetings or the sales materials used in the meetings. NASD also said Citigroup failed to notice several red flags raised by the brokers’ conduct. For instance, Citigroup was informed via branch audit questionnaires that the brokers were holding seminars, but failed to ask for the samples of materials used in the seminars or proof that the seminars were approved, as is required by the company. On another occasion, Citigroup failed to detect and correct the misstatements in the sales materials, even after corporate compliance officials had the chance to examine the seminar handouts.
For more information click here. And watch for the July/August issue of Financial and Insurance Meetings magazine to see how an Allstate manager and compliance professional work together to ensure their meetings don’t run afoul of NASD regulations.