Citigroup Global Markets has agreed to pay more than $1.1 million to the NASD after it found itself in a heap of trouble for not detecting a scheme in which brokers waived millions in fees. The weirdest thing about the latest regulatory mishap involving Citi is the hedge fund connection: It seems that some of the more than 100 of CGM brokers managed to apply a fee waiver reserved for the disabled individuals in 2,419 mutual fund transactions between 2001 and 2002. The brokers brazenly even applied the fee waiver to hedge funds in four transactions totaling $21 million. The mutual fund companies involved blocked those deals, says the NASD, but the agency found it “inexplicable” that “Citigroup failed to scrutinize those transactions.” The hedge funds have not been identified, though one wonders why they would have agreed to the fee waiver. Incidentally, it’s déjà vu all over again for Citi. Back in 1997, two Citigroup reps were disciplined for similar funny fee waivers, and the NASD has criticized the banking giant for not having implemented procedures to prevent a repeat.
