FINRA Awards $550,000 in Damages to Citigroup, Inc (NYSE: C) Investors

The Financial Industry Regulatory Authority (FINRA) awarded more than $550,000 in damages to investors that put money into a fixed-income municipal arbitrage instrument which was sold by Citigroup, Inc (NYSE: C)

According to a release from the law firm representing plaintiffs, FINRA said that it believed the bank had misled investors and its own brokers by under-stating the risk of the investment.

This latest judgment comes one month after a case involving Maddox Hargett & Cruso PC, who netted three investors more than $1.7 million in connection to their investment in a hedge fund operated by Citigroup, Inc (NYSE: C) which saw its value decline dramatically during the recession.

Citigroup, Inc (NYSE: C) defended its management of the hedge funds, saying that they were only sold to clients that had large, diversified portfolios. Citigroup, Inc (NYSE: C) spokesman Alex Samuelson said to the press , “We are disappointed and disagree with this decision as it is inconsistent with other panels, which have dismissed similar claims.”

The New York-based bank created the product, titled, MAT 3 Municipal Arbitrage Fund, and targeted it at high-net-worth clients in 2007. The investment was labeled as a fixed-income alternative with the same volatility of the Lehman Brothers Aggregate Bond Index.

The lawyers said that the product was “a risky investment that not only exposed investors to a 100% or more loss of principal, but was 2.5 times more volatile than the S&P 500 and 7.8 times more volatile than a traditional portfolio of municipal bonds.”