Citigroup Inc. was ordered by brokerage-industry arbitrators to pay more than $1 million to three investors in its municipal-bond funds.
The clients had accused the New York-based bank’s global markets unit of breaching fiduciary duty and other misconduct tied to their investments in funds known as MAT Five and MAT Three, according to an Aug. 23 Financial Industry Regulatory Authority award. The three-member arbitration panel didn’t explain its reasoning for the ruling.
“The fund was represented by Citigroup to its brokers as a fixed-income alternative,” Ryan Bakhtiari, an attorney for the claimants at law firm said in a statement. “In truth, evidence at the hearing demonstrated that MAT was a risky investment.”
The ruling “is inconsistent with other decisions and we are disappointed that these claims were not dismissed,” Citigroup spokesman Alexander Samuelson said
In May, arbitrators dismissed a $1.5 million claim brought by another investor in the funds, according to decisions posted on Finra’s website. In two other rulings that month, arbitrators ordered the company to pay plaintiffs a total of more than $2 million.
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.