Citigroup Ordered to Pay $54 Million After Misrepresenting Risk of Municipal Bonds

by Wall Street Fraud on January 11, 2012

Investment fraud attorneyA federal judge in Colorado recently upheld a sizable arbitration award to former clients of Citigroup Global Markets Inc. who claimed the bank misrepresented the risks associated with certain municipal bonds. The investors initially won a $54.1 million FINRA arbitration award in April. Citigroup then appealed the ruling.

The investors claimed that Citigroup marketed the bonds to high-net-worth individuals as a higher-yielding alternative to municipal bond portfolios that carried little, if any, additional risk. They further alleged that the bank misrepresented the risks involved in these products in lieu of making or continuing direct investment in highly rated and insured municipal bonds or like securities. According to reports, the investors suffered losses as high as 80% when the bond strategy failed.

In its arbitration defense, Citigroup argued that the claimants had signed subscription agreements in which they acknowledged that they had read and understood the written risk disclosure, including the warning that they could lose the entire principal they were investing.

The Message for Investors

This case highlights that federal judges generally show great respect for FINRA arbitration awards. “Maximum deference is owed to the arbitrators because the parties have contracted to use binding arbitration rather than litigation as a means to resolve their disputes,” U.S. District Judge Christine Arguello wrote in the order.

Source: Investment News

If you a broker or adviser has misrepresented the risks associated with an investment product, we may be able to help you recover your losses. Contact us today at 215-839-3953 for a free consultation.

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If you have been the victim of stock brokerage fraud, securities fraud, mutual fund fraud, stockbroker fraud, annuities fraud, or any other type of investment fraud, please contact us today for a free case evaluation. Our talented and aggressive legal and professional staff is eager to help you recover your losses.

 

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