Citigroup Global Markets, Inc. (“Citi”) last month agreed to entry of an SEC order imposing remedial sanctions and cease-and-desist proceedings, arising from Citi overcharging at least 60,000 advisory clients an estimated $18 million in unauthorized advisory fees between 2000 and 2015. These accounts included Morgan Stanley Smith Barney accounts through June 2013.
Some overcharges occurred when clients’ individually negotiated rates were not correctly entered into Citi’s computer system. Other times, the negotiated rates were reset to higher, default rates when clients moved between branches. More clients were overcharged when they terminated their advisory accounts with Citi but failed to receive a prorated rebate of pre-paid quarterly advisory fees.
Citi also lost 83,000 advisory contracts, which its procedures required it to maintain for the life of the account plus ten years.
The SEC’s order is a good reminder to advisory clients to carefully review monthly and quarterly account statements and summaries. Errors can happen even in accounts open for several years. Account statements are sometimes confusing or difficult to interpret. Clients should not hesitate to ask their advisor, accountant or attorney for help reading and understanding a statement. It’s also important for clients to request and maintain a copy of all executed account agreements and other account opening documents; do not rely on the firm to keep track of these important documents.
A copy of the SEC’s order can be viewed and downloaded at the SEC’s website: http://www.sec.gov/litigation/admin/2017/34-79882.pdf