SEC fines Citigroup, Morgan Stanley over forex trading program

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By Jonathan Stempel

<span class="articleLocation”>Citigroup Inc and Morgan Stanley each agreed to pay more than $2.96 million to settle charges
they misled investors about a foreign exchange trading program
they were selling, the U.S. Securities and Exchange Commission
said on Tuesday.

The SEC said the civil case arose from the marketing of
CitiFX Alpha to Morgan Stanley Smith Barney customers from
August 2010 to July 2011, when Citigroup held a 49 percent
ownership stake in that joint venture.

According to the regulator, brokers failed to adequately
disclose that investors would be taking on more leverage than
suggested by the program’s past performance and risk metrics,
which had been used in the marketing.

The SEC also said brokers failed to adequately disclose the
markups charged on trades.

Some of the investors had no experience in foreign exchange
trading, and did not understand some basic information about
that market, the regulator added.

Neither bank admitted or denied wrongdoing in agreeing to
settle. Their payouts each include a $2.25 million civil fine,
plus disgorged profit and interest, the SEC said.

Morgan Stanley bought out Citigroup’s stake in the joint
venture in June 2013.



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