Citigroup Division Fined Over Investor Advice

Securities regulators have ordered a division of Citigroup Inc. to pay a $275,000 fine plus restitution, alleging that it recommended high-risk commodity futures funds to people who shouldn’t have invested in them and failed to fully disclose the risks.

The NASD (formerly the National Assn. of Securities Dealers), the brokerage industry’s self-policing organization, announced the settlement with Citigroup Global Markets Inc. on Tuesday.

Along with the civil fine, the company, which neither admitted nor denied wrongdoing, is returning as much as $203,000 to 45 customers to whom it allegedly made unsuitable recommendations for the Citigroup Diversified Futures Fund and the Salomon Smith Barney Diversified 2000 Futures Fund in 2002-03.

The customers did not meet the minimum requirements specified in the prospectuses for the two funds, the NASD said. In one case, it said, a customer with a net worth of $25,000 had just lost her job, and the $4,000 she invested in the futures fund came from a retirement account.

Citigroup, the nation’s largest financial institution, also failed to maintain required records on its sales to more than 8,200 investors in the two funds and to adequately disclose in website ads the risks of investing in such funds, the group said.

Citigroup spokeswoman Kimberly Atwater said the company “took immediate action and ... cooperated fully with the NASD to ensure that all suitability requirements and documentation are strictly adhered to and remain in full compliance with NASD guidelines.”