Citigroup Global Markets has been ordered to pay $1.12 million for failing to detect a scheme involving 100 brokers who managed to waive mutual fund sales charges by falsely claiming their clients were disabled. “Citigroup missed the red flags,” NASD enforcement chief James Shorris said in a Reuters interview, noting that Citi has been down this road before. In 1997, was disciplined for it and still “didn’t take effective steps to prevent a recurrence…. We were deeply disappointed.” Citi agreed to the fine, though it denies any wrongdoing. Among the oddities in the scheme, according to Shorris, was that among the 2,415 mutual fund transactions waivers based on disability, there were four hedge funds transactions valued at $21 million, which he called “inexplicable.” The scheme reportedly was cracked based on an anonymous tip.
