Thursday, May 27, 2010

FINRA Press Release: FINRA Sanctions Citigroup

Citigroup Pays $1.5 Million for Supervisory Failures Related to Elaborate Scheme to Misappropriate Millions in Trust Funds Belonging to Cemeteries Located in Michigan and Tennessee

The Financial Industry Regulatory Authority (FINRA) issued a press release this week announcing that 
it has imposed a monetary sanction of $1.5 million against Citigroup Global Markets Inc. for supervisory violations relating to its handling of trust funds belonging to cemeteries in Michigan and Tennessee. The sanction represents a $750,000 fine and disgorgement of $750,000 in commissions, which is being returned to the cemetery trusts as partial restitution.
The settlement is detailed in the FINRA AWC No. 20070094327-02.

FINRA found that Citigroup broker Singer and two of his customers, Smart and Bush, misappropriated trust accounts. Successively, Smart and Bush owned a group of Michigan cemeteries. Smart used the trust accounts of Michigan cemeteries to purchase the very same Michigan cemeteries and other cemeteries and funeral homes in Tennessee in August 2004. Singer opened up multiple accounts for Smart and Bush and for entities which they owned and he improperly transferred the cemetery trust funds to these accounts. Furthermore, FINRA found that Citigroup failed to implement special supervision when the company knew about the group’s suspicious activities.

Misappropriation is the illegal use of funds by a person or group of persons entrusted to manage such funds.

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