Citigroup Fined For Misleading Hedge Funds To Investors

The NASD has fined Citigroup Global Markets, Inc. $250,000 in what the NASD described as the largest enforcement action involving hedge funds against a brokerage firm.

The NASD alleged that more than 100 pieces of sales literature distributed in 2002 and 2003 misled customers. Among other things, the literature touted rates of return of 12% to 15% per year, but failed to "provide a sound basis for evaluating the target", and failed to adequately disclose the risks of the investments.

The NASD clearly has signaled that it will not tolerate anything less than "full and accurate information", and that it has a "commitment to making certain that firms provide the investing public with a sound basis for evaluating hedge fund investments, and adequately disclose all of the risks."

Source: NASD News Release, October 25, 2004