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Morgan Stanley, Citigroup units agree to settle SEC charges


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Morgan Stanley, Citigroup units agree to settle SEC charges

Morgan Stanley Smith Barney LLC and Citigroup Global Markets Inc. have agreed to settle SEC charges that they made false and misleading statements about a foreign exchange trading program sold to investors.

The SEC said each company has agreed to pay about $3.0 million as part of the settlement, without admitting or denying the commission's findings. Each company will pay disgorgement of $624,458.27 plus interest of $89,277.34 and a penalty of about $2.3 million, for a combined total of more than $5.9 million.

According to the SEC's orders, Citigroup held a 49% interest in Morgan Stanley Smith Barney at the time, and registered representatives at both companies were pitching a foreign exchange trading program to Morgan Stanley customers from August 2010 to July 2011. The SEC found that the written and verbal presentations were based on the program's past performance and risk metrics, and the companies did not disclose that investors could be placed into the program using substantially more leverage than they were told and that markups would be charged on every trade. According to the SEC, the undisclosed information caused investors to see major losses.

The SEC found that the two companies violated the section of the Securities Act of 1933 that prohibits getting money or property by means of any material misstatement or omissions in the offer or sale of securities.