Citigroup Forced To Pay $18 Million for Overbilling Their Clients

09:00 01/26/2017

C  has just agreed to pay $18.3 million for overbilling their clients.

According to an announcement from the Securities and Exchange Commision, Citigroup Global Markets will pay $18.3 million to settle charges that the bank has overbilled investment advisory clients a well as misplace client contracts.

The bank's investigation was conducted by Olivia Zach and Celeste Chase in the New York office and supervised by Mr. Sanjay Wadhwa, the Senior Associate Director of the SEC’s New York office.

Citigroup agreed to the SEC’s cease-and-desist order and also consented to undertakings related to its fee-billing and books-and-records practices.

The Director of the SEC's New York Regional Office, Andrew. M. Calamari stated, "Advisory clients have every expectation that the fees charged by their financial adviser reflect the negotiated rate. Citigroup failed to take the necessary precautions to ensure clients were billed in a manner consistent with their advisory agreements."

According to the SEC, there were at least 60,000 advisory clients that were overcharged approximately $18 million. The overcharges were in unathorized fees due to Citigroup not confirming the accuracy of billing rates that were entered into computer systems. The numbers put into computer systems were compared to the fee rates that were outlined in client contracts and billing histories as well as other documets.

The SEC found that Citigroup also collected fees inappropriately in a 15-year period, and did so during times when the clients had suspended their accounts. Those clients that had been affected were reimbursed.

Sanjay commented, 'It’s a fundamental responsibility of a financial adviser to preserve key account documents such as advisory contracts. Citigroup failed to safeguard its client contracts, which seriously impeded its ability to determine the proper amount of fees the firm was authorized to charge."

The order by the SEC has also discovered that Citigroup cannot locate 83,000 advisory contracts for accounts that were opened during the years from 1990 to 2012. Acording to the SEC, Citigroup received approximately $3.2 million in excess fees from advisory clients whose contracts were lost.

The $18.3 million that Citigroup must pay includes a $3.2 million disgorgement of the excess fees collected due to the missing contracts, $800,000 in interest, and a $14.3 million penalty.

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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