Federal regulators have imposed a total of $60 million in fines on money management units at Citigroup Inc. and Marsh & McLennan Companies Inc.[@@]
The U.S. Securities and Exchange Commission has accused Putnam Investments, a subsidiary of Marsh & McLennan, New York, of using fund assets to pay dozens of broker-dealers for “prime shelf space” from 2000 to 2003 without disclosing that use of fund assets to shareholders.
The SEC has accused Citigroup Global Markets Inc., a subsidiary of Citigroup, New York, of giving certain mutual fund companies prime shelf space in exchange for payments from the fund companies that were not fully disclosed to customers.
The SEC also has accused Citigroup Global of selling Class A shares, which come with relatively high fees and are aimed at small investors, to investors who qualified for Class B shares, which come with relatively low fees and are aimed at investors with a total of at least $50,000 in invested assets. Fund companies call the asset levels that let clients buy the lower-priced shares “breakpoints.”
Putnam has agreed to add $40 million to its mutual funds to settle the SEC charges lodged against it, and Citigroup Global has agreed to pay $20 million in fines to settle the SEC charges it faced.
Neither company is admitting or denying the commission’s findings.
In related news, the National Association of Securities Dealers Inc., Washington, has imposed $21 million in fines on Citigroup Global and units of American Express Company, New York, and J.P. Morgan Chase & Company, New York, in connection with allegations of mutual fund breakpoint violations.