Tags: Muni | Bond | Payouts | Scare | Wall | Street

Muni Bond Payouts Scare Wall Street

Thursday, 29 Jul 2010 09:21 AM

Two years after the financial crisis, Wall Street brokerage firms reportedly are being ordered to pay millions to investors who lost big on what some thought were low-risk municipal-bond fund investments.

Reimbursements thus far have included $2.1 million paid to one family by First Republic Securities on the order of an arbitration panel, and $2.1 million paid by Citigroup to three separate groups of petitioners, The Wall Street Journal reports.

When First Republic’s attorneys argued that investors were sufficiently knowledgeable to appreciate the investment risks involved, the arbitrators criticized the "glibness" of the funds' managers and said that there was no "realistic advance recognition [of] any specific risks or patterns of risk."

"We strongly disagree with this finding, which is inconsistent with other legal decisions on this matter,” said a spokesperson for First Republic. “We believe proper disclosure was made about the risks and rewards."

A spokesperson for Citigroup, the largest sponsor of such funds, said that three other investor claims were denied, which "supports our view the investments were appropriately sold."

The Securities and Exchange Commission is reported to be currently reviewing whether fund sponsors deliberately understated the funds' risk, and federal prosecutors in the Eastern District of New York are looking at the funds' disclosures as well.

The recently passed financial regulatory law will affect municipal bonds and corporate bonds differently because corporate bonds are registered securities and municipal bonds are not.

According to the Securities Industry and Financial Markets Association, there is currently about $2.7 trillion worth of municipal bonds outstanding in the United States.

© 2017 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
StreetTalk
Two years after the financial crisis, Wall Street brokerage firms reportedly are being ordered to pay millions to investors who lost big on what some thought were low-risk municipal-bond fund investments. Reimbursements thus far have included $2.1 million paid to one...
Muni,Bond,Payouts,Scare,Wall,Street
258
2010-21-29
Thursday, 29 Jul 2010 09:21 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved