Citigroup has reached an $18.3 million settlement with the US Securities Exchange Commission (SEC) over chargers it overbilled investment advisory clients and lost client contracts.
The order from the SEC alleged that at least 60,000 advisory clients were overcharged approximately $18 million in unauthorised fees by the bank because it failed to confirm the accuracy of billing rates entered into its computer systems.
The US regulator also found Citigroup improperly collected fees during time periods where clients suspended their accounts. The billing errors occurred over a 15-year period, and Citi has since reimbursed the affected clients.
“Advisory clients have every expectation that the fees charged by their financial adviser reflect the negotiated rate. Citigroup failed to take the necessary precautions to ensure clients were billed in a manner consistent with their advisory agreements,” said Andrew Calamari, director of the SEC’s New York regional office.
According to a report from the Wall Street Journal, some of the client accounts were held in a joint venture with Morgan Stanley following the financial crisis. Citigroup had sold its remaining stake in the unit to Morgan Stanley in 2013.
“Citigroup failed to safeguard its client contracts, which seriously impeded its ability to determine the proper amount of fees the firm was authorised to charge,” added Sanjay Wadhwa, senior associate director of the SEC’s New York office.