That is the outcome of a FINRA (Financial Industry Regulatory Authority) arbitration filed by three investors against Citigroup. On April 12, 2011, a FINRA arbitration panel ordered Citigroup to pay the investors $54.1 million for losses in their bond funds.
According to the complaint, filed in June 2009, the municipal bond funds that the investors put their money in lost 77 percent of their value. Although the FINRA panel did not give a reason for its decision, it ordered Citigroup to pay $34 million in compensatory damages, $17 million in punitive damages and an additional $3 million in legal fees and expenses.
According to The Wall Street Journal (04/13/11), the bond funds at issue lost their value when the financial crisis hit in 2007. The plaintiffs alleged Citigroup breached its fiduciary duty, violated its contract, committed fraud, broke FINRA regulations and failed to properly supervise its advisors.
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Hedge Fund Net (04/14/11) reports that the funds were known as municipal arbitrage hedge funds (also known as muni arb funds) and were marketed from 2002 to 2007. The article notes that they were marketed as having an only slightly higher risk profile than a municipal bond portfolio.
A spokesperson for Citigroup said that the company is disappointed with the decision and reviewing its options.
A Reuters (04/12/11) article notes that prior to this award of $54 million, an investor was awarded $6.4 million in an arbitration related to the same Citigroup funds.