NASD Fines Citigroup For Improper Hedge Fund Advertising

by Glen Shapiro, LawAndTax-News.com, New York

28 October 2004

The National Association of Securities Dealers (NASD) announced on Monday that it has fined financial services firm Citigroup $250,000 for providing misleading hedge fund sales material.

According to the industry body, around 100 pieces of advertising and sales literature circulated by the firm between June 2002 and July 2003 advertised annual returns of 12-15% "without providing a sound basis for evaluating the target". The sales literature in question also failed to provide adequate disclosure regarding the potential risks inherent in hedge fund investment.

"As hedge funds and 'funds of hedge funds' are marketed more and more aggressively to individual investors, ensuring that those investors receive full and accurate information is critical," explained NASD Vice Chairman Mary L. Schapiro.

She continued: "This enforcement action underscores our commitment to making certain that firms provide the investing public with a sound basis for evaluating hedge fund investments, and adequately disclose all of the risks."

In agreeing to the settlement amount, Citigroup neither admitted nor denied the allegations.

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