The NASD has fined Citigroup Global Markets more than $1.1 million in fines and restitution for failing to prevent more than 100 of its brokers from filing false disability claims with mutual fund companies between June 2001 and June 2002 in order to waive the contingent deferred sales charges on clients' holdings.
The firm must pay a fine of $400,00 and return $715,000 in restitution to the affected mutual fund companies, which were not named.
The NASD noted that Citigroup had conducted and been sanctioned for similar misconduct in 1997.
To date, NASD has taken disciplinary action against five Citigroup registered representatives relating to this misconduct. Its investigations into other Citigroup brokers are continuing.
Mutual funds sometimes impose contingent deferred sales charges on Class B shares if they redeem the shares within a certain period.