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Citi Ordered to Pay Fines For Unit Investment Trust Sales

By Alex Padalka June 25, 2019

Self-regulator Finra has censured and fined Citigroup Global Markets over alleged failures in the sale of unit investment trusts, the industry organization says.

From February 2011 to February 2017, the registered broker-dealer allegedly failed to identify and apply sales charge discounts on eligible purchases of UITs and to supervise their trading, according to a letter of acceptance, waiver and consent published by Finra.

Citigroup allegedly failed to have in place an adequate supervisory system and written procedures in regard to crediting available discounts to eligible UIT purchases, the regulator says. The company failed to apply sales charge discounts in 594 of 1,476 eligible UIT transactions, costing clients excessive sales charges of $152,488.59, according to Finra.

The company also allegedly failed to have an adequate system to supervise UIT trading in general, according to the letter of consent.

Citigroup agreed to a censure and to pay a $225,000 fine and $152,488.59 in restitution, plus interest, without admitting or denying Finra’s findings, according to the consent letter.

Finra

UITs are SEC-registered investment companies that offer shares or units in a portfolio of securities via a one-time public offering to investors.

UITs terminate on a specified maturity date, often after 15 or 24 months, at which point the underlying securities are sold and the resulting proceeds are paid to the investors, according to Finra.