{"id":5249,"date":"2011-12-27T00:00:00","date_gmt":"2011-12-27T06:00:00","guid":{"rendered":"https:\/\/institutionalinvestorsecuritiesblog.blawgcloud.com\/2011\/12\/citigroup_request_to_overturn"},"modified":"2022-04-14T14:44:02","modified_gmt":"2022-04-14T19:44:02","slug":"citigroup-request-to-overturn","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/citigroup-request-to-overturn\/","title":{"rendered":"Citigroup Request to Overturn $54.1M Municipal Bond Arbitration Ruling Denied by Judge"},"content":{"rendered":"

A US judge has denied Citigroup<\/a>\u2019s request that the $54.1M Financial Industry Regulatory Authority arbitration award issued to investors that sustained losses in municipal bond funds be overturned. This is one of the largest securities arbitration<\/a> awards that a broker-dealer has been ordered to pay individual investors. Brush Creek Capital, retired lawyer Gerald D. Hosier, and investor Jerry Murdock Jr. are the award\u2019s recipients. However, these Claimants are not the only investors to come forward contending that they were told the funds were suitable for investors that wanted to preserve their capital.<\/p>\n

The investor losses were related to several leveraged municipal bond arbitrage funds that saw their value significantly drop between 2007 and 2008. Citigroup Global Markets had sold the municipal bond funds through MAT Finance LLC. Proceeds were invested in longer-term muni bunds while borrowing took place at low, short-term rates. The strategy proved to be unsuccessful, resulting in investors losing up to 80% of their money.<\/p>\n

According to The Wall Street Journal, when it issued its ruling the arbitration panel appeared to reject three defenses that financial firms usually make:<\/p>\n

\u2022\tThe financial crisis, and not the financial firm, is to blame for the losses.
\n\u2022\tSophisticated, rich investors should have known what risks were involved.
\n\u2022\tThe prospectus had warned in advance that investors could lose everything.<\/p>\n

The Claimants alleged fraud, failure to supervise, and unsuitability. They had sought no less than $48 million in compensatory damages, fees, lost-opportunity costs, commission, lawyers\u2019 fees, and interest. <\/p>\n

The FINRA arbitration panel awarded $21.6 million in compensatory damages, plus 8% per annum, to Hosier, $3.9 million in compensatory damages, plus 8% per annum, to Murdock, Jr, and $8.4 million in compensatory damages, plus 8% per annum, to Brush Creek Capital LLC.<\/p>\n

All Claimants were also awarded $3 million in lawyers\u2019 fees, $17 million in punitive damages, $33,500 in expert witness fees, $13,168 in court reporter expenses, and $600 for the Claimant\u2019s filing fee. <\/p>\n

Following the FINRA ruling, Citigroup contended that the arbitration panel had ignored the law when arriving at the award. The brokerage firm also claimed that investors could not have depended on verbal statements that the financial firm had expressed about purchases because the clients had acknowledged through signed agreements that they could lose everything they invested. By denying Citigroup\u2019s request to throw out the arbitration award, Judge Christine Arguello, however, said that the court found Citigroup\u2019s \u201cargument wholly unpersuasive.\u201d<\/p>\n

A Crack in Wall Street\u2019s Defenses<\/a>, New York Times, April 24, 2011<\/p>\n

Citigroup Slammed With $54 Million Award by FINRA Arbitrators in MAT \/ ASTA Case, Municipal Bond<\/a>, April 12, 2011<\/p>\n

Citigroup loses suit to overturn $54-million ruling<\/a>, Reuters, December 22, 2011<\/p>\n


\nMore Blog Posts:<\/strong>
\nJPMorgan Chase to Pay $211M to Settle Charges It Rigged Municipal Bond Transaction Bidding Competitions<\/a>, Stockbroker Fraud Blog, July 9, 2011<\/p>\n

Citigroup Ordered by FINRA to Pay $54.1M to Two Investors Over Municipal Bond Fund Losses<\/a>, Stockbroker Fraud Blog, April 13, 2011<\/p>\n

Citigroup\u2019s $285M Mortgage-Related CDO Settlement with Raises Concerns About SEC\u2019s Enforcement Practices for Judge Rakoff, Institutional Investor Securities Blog, November 9, 2011\n<\/p>\n

Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A US judge has denied Citigroup\u2019s request that the $54.1M Financial Industry Regulatory Authority arbitration award issued to investors that sustained losses in municipal bond funds be overturned. This is one of the largest securities arbitration awards that a broker-dealer has been ordered to pay individual investors. Brush Creek Capital, retired lawyer Gerald D. Hosier, […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3953,3820,3752,3739,3922],"tags":[],"class_list":["post-5249","post","type-post","status-publish","format-standard","hentry","category-arbitration-rulings","category-citigroup","category-financial-firms","category-finra","category-municipal-bonds"],"yoast_head":"\nCitigroup Request to Overturn $54.1M Municipal Bond Arbitration Ruling Denied by Judge — Investor Lawyers Blog — December 27, 2011<\/title>\n<meta name=\"description\" content=\"A US judge has denied Citigroup\u2019s request that the $54.1M Financial Industry Regulatory Authority arbitration award issued to investors that sustained — December 27, 2011\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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