Citigroup Global Markets

Newark, NJ: (Jul-16-07) State authorities filed a lawsuit against Citigroup Global Markets, alleging that it failed to supervise two of its Smith Barney agents and maintain accurate records, which cost investors more than $3 million. The charges were made following a state Bureau of Securities investigation. The case stems from May 2003, when the Smith Barney agents recommended speculative short-sale trading for shares of Trinity Industries Inc. to clients. Short-selling is a bet that stocks or markets will fall to make a profit from downturns. Here, it involved shares that an investor borrowed, but did not own. If the price rises, the investor faces a big risk of loss. By July 2003, the two agents had shorted approximately 263,000 Trinity shares for 42 clients, many deemed unsuitable for short-selling investment strategies because of their age, investment objectives and financial profiles. When Trinity shares rose investors lost millions, including a 67-year-old woman with an annual income of $37,500 who lost approximately $52,500.

In a settlement reached, Citigroup Global Markets agreed to pay nearly $1 million to settle state allegations. Citigroup Global Markets Inc., part of New York-based Citigroup Inc., neither admitted nor denied any wrongdoing. [FORBES: SHORT SALE TRADING]

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Published on Jul-18-07