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Citigroup Adds Funds to Mat and ASTA

The investing public and Wall Street has surely made note of the recent bailout of megabank, Citigroup’s, Asta and Mat hedge funds due to uncertainty in the once-safe municipal bond market. The latest news brings one more warning to be wary of hedge funds whether you invest in them or manage them.

According to Financial Times online in a March 11 article by Francesco Guerrera, Citigroup initiated a $1 billion bailout of six internal hedge funds, with $600 million in additional capital and another $400 million targeted to boost the shaky funds.

With growing losses on mortgage-related products, could bond insurers forfeit their coveted triple-A ratings? That question has triggered extensive turmoil in the municipal bond market. For brokerage clients and affluent bank customers who bought Citigroup’s Asta and Mat funds, the plummeting municipal bond prices resulted in potential margin calls by prime brokers.

The bailout by Citigroup showcases the risks taken by many Wall Street firms when they created or bought hedge funds in order to boost trading profits and collect high fees from investors. Of course, those risks also affect the investors in hedge funds. Because of the lack of transparency in the funds, hedge fund investors are at a disadvantage.

The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization that oversees U.S. broker-dealers to protect investors and ensure market integrity. Established in 2007, FINRA was formed by merging the National Association of Securities Dealers (NASD) and the regulation, enforcement, and arbitration functions of the New York Stock Exchange (NYSE). Its primary responsibilities include writing and enforcing rules governing the activities of its member firms, conducting regular examinations to ensure compliance, and providing a dispute resolution forum for investors and broker-dealers.

FINRA also focuses on investor education, offering resources to help individuals make informed investment decisions and recognize potential fraud. One of its key tools is BrokerCheck, a public database providing detailed information about brokers and brokerage firms, including professional backgrounds and disciplinary histories. By maintaining stringent regulatory standards and emphasizing investor protection, FINRA plays a crucial role in fostering trust and stability in the U.S. securities markets.