Citigroup Global Markets agreed to pay more than $15 million to settle charges that some of its brokers used misleading information in retirement seminars. The information caused over 200 BellSouth employees to lose about $12 million of their retirement money, according to the NASD.
Citigroup was fined $3 million to settle the charges and ordered to pay about $12 million in restitution to the employees. Specifically, the NASD found that Citigroup failed to adequately supervise a team of brokers based in Charlotte, N.C. who used misleading sales materials during dozens of seminars and meetings for hundreds of employees of BellSouth. As a result of the presentations, more than 400 BellSouth employees opened over 1,100 accounts with the Citigroup brokers.
The NASD described most of the employees as “unsophisticated investors with minimal experience in the financial markets” who retired in their mid-50s—well before the BellSouth retirement age of 62. They were described as being of generally modest means, with retirement savings of less than $350,000.
The employees typically cashed out their pensions and 401(k) accounts, and invested these proceeds and other retirement assets with the Citigroup brokers. “The improperly supervised brokers in this case used misleading documents that made exaggerated and unwarranted projections of future earnings without fully explaining the risks involved,” asserted James S. Shorris, NASD executive vice president and head of enforcement. “Many BellSouth employees gave up secure pensions, believing they could afford to retire early, but ended up losing substantial amounts from their retirement nest eggs.”
For its part, Citigroup said in a statement that it’s taking the matter “very seriously. The inappropriate actions of a small group of employees in one office more than five years ago don’t reflect the dedication and commitment of the vast majority of Financial Advisors in Charlotte and elsewhere who work hard for clients each day. The Firm is also working on all fronts to prevent a similar situation from occurring again.” A Citigroup spokeperson confirmed that the two lead financial advisors involved in the matter are no longer with the firm.