A Los Angeles based Financial Industry Regulatory Authority (FINRA) arbitration panel awarded $550,504 to a married couple. The award represents a return of 100 percent of the client’s losses as a result of their purchase of Mat Three.
Mat Three was a leveraged municipal arbitrage hedge fund launched by Citigroup Global Markets, Inc. and sold through Smith Barney, part of Citigroup’s (NYSE: C – News) Global Wealth Management Group in February 2006 and was marketed only to high net worth clients of the firm. The fund imploded in February 2008 causing catastrophic losses to investors.
“Despite widespread evidence of material omissions, Citigroup elected to employ the “blame the customer” defense which the FINRA panel rejected. The award is the second significant investor win in a Mat case for clients of our firm in the last 2 weeks.”
“The fund was represented by Citigroup to its brokers as a fixed income alternative with the volatility of the Lehman Brothers Aggregate Bond Index,” stated Ryan K. Bakhtiari who added “In truth, evidence at the hearing demonstrated that Mat Three was a risky investment which subjected investors to a 100 percent or more loss of principal.”
The FINRA arbitrators also assessed the cost of the hearing against Citigroup Global Markets, Inc.
FINRA arbitration is a dispute resolution process administered by the Financial Industry Regulatory Authority (FINRA). It provides a forum for resolving monetary disputes between investors and securities firms or brokers without going to court. The process is generally faster and less formal than traditional litigation, and decisions are made by a panel of arbitrators who are knowledgeable in securities law and industry practices. Arbitration through FINRA is binding, meaning the decision is final and enforceable in court. This process is commonly used for disputes involving investment losses, unsuitable recommendations, or misrepresentation. Investors must agree to arbitration in their brokerage agreements, often as a condition of opening an account. While arbitration can be a more efficient way to resolve disputes, it also has limitations, such as limited appeal options and potentially high costs. Despite these challenges, FINRA arbitration remains a crucial mechanism for investor protection and dispute resolution in the securities industry.