More On Legal & Compliancefrom The Advisor's Professional Library
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
Citigroup (C) said Wednesday that it will pay $590 million to settle a class-action lawsuit with investors who bought Citi stock from late February 2007 through mid-April 2008.
Plaintiffs in the lawsuit accused Citi of misleading them through misstatements and omissions in the company’s disclosures with regard to its exposure to subprime debt and assets tied to such debt.
Citigroup, however, denies the allegations and says it is entering into the settlement to “eliminate the uncertainties, burden and expense of further protracted litigation.” It intends to pay for the settlement with existing litigation reserves.
“Citi will be pleased to put this matter behind us,” the company said in a press release shared with AdvisorOne. “This settlement is a significant step toward resolving our exposure to claims arising from the period of the financial crisis.”
Meanwhile, experts say, this may be good news for the company but isn’t enough compensation for shareholders.
“The decision made by Citigroup CEO Vikram Pandit to ‘put the pain from the financial crisis behind it’ resembles the earlier decision by Goldman Sachs to settle for a fine instead of long legal battles,” said John Alan James, executive director of the Center for Global Governance, Reporting and Regulation at Pace University, in a statement. “It could seem too little and too late for Citi shareholders who have seen the value of Citi shares plunge by over $173 billion.”
Citi’s shares are trading at around $29.60, which is down about 80% from late 2007 and roughly 10% for the past six months.
“Citi is fundamentally a different company today than at the beginning of the financial crisis,” the company said. “Citi has overhauled risk management, reduced risk exposures and through our core businesses in Citicorp, we are focused on the basics of banking, leveraging our unique presence throughout the emerging and developed markets to serve our clients and the real economy.”
The proposed settlement will be reviewed by Judge Sidney Stein in the U.S. District Court for the Southern District of New York, where the class action is pending.
Citi, Morgan Stanley Delay MSSB Valuation
Citigroup and Morgan Stanley (MS) said late Tuesday that they have extended the date on which the determination of the fair market value of the Morgan Stanley Smith Barney joint venture and the related deposit amount is to be made. The new deadline is Sept. 10.
Led by James Gorman, Morgan Stanley would like to raise its stake in MSSB, which includes about 16,930 advisors, by 14% from 51%. Citigroup has placed the full value of MSSB at $22 billion, while Morgan Stanley says it is worth only $9 billion (though its SEC filings put the value closer to $12 billion).
Both banks are now working with Perella Weinberg Partners on an appraisal, which could give MSSB a value closer to the $15 billion that some Wall Street analysts have given it.