Morgan Stanley and Citigroup have agreed to pay almost $6 million in fines for misleading and making false statements to investors about a foreign exchange trading programme.
The Securities and Exchange Commission (SEC) found the FX trading programme - known as CitiFX Alpha - failed to disclose that investors could be placed into the programme with more leverage than advertised and mark-ups would be charged on each trade.
Investors who were a part of the CitiFX Alpha programme suffered significant losses.
Eric Bustillo, director of the SEC’s Miami regional office, explained Citi and Morgan Stanley sold securities without giving investors information on the risks and costs of the programme.
“Investors simply cannot be sold investments based on disclosures that are inaccurate or incomplete,” he added.
Citi and Morgan Stanley did not admit or deny the allegations, although agreed to pay disgorgement of over $624,000 plus $89,000 in interest and a $2.9 million penalty each, bringing the total to just under $6 million.