The Bull

Monday 22

April, 2019 7:01 PM



Citigroup to give back A$3mn to retail customer group

Citigroup to give back A$3mn to retail customer group

It seemed as if most of the ire from the Royal Commission and subsequent regulator action was aimed squarely at the big four lenders, but it appears not all of the other banks have managed to escape censure.

Share |

By Thomas Hudson 15.04.2019

It seemed as if most of the ire from the Royal Commission and subsequent regulator action was aimed squarely at the big four lenders, but it appears not all of the other banks have managed to escape censure.

One of America's biggest banks, Citigroup, which has plenty of operations in Australia, has now admitted fault in a remuneration process that will see the banking giant pay a shared sum of A$3million to 114 retail customers who were caught up in a series of poor advisory statements from the bank.

It has emerged that many customers who invested off the back of advice from Citigroup staff ended up losing lots of money because they were sold deals that seemed better than they actually were.

This puts Citigroup in a similar position to many other big lenders who were brought before the Hayne Commission to explain their actions, with class action lawsuits being threatened until the banks relented and began to pay out compensation.

It suggests that although the Australian Big Four were the first in the firing line, they are not expected to be the only ones getting into trouble in some capacity. Indeed, as was stated at the time, it was a culture of putting sales and profits over customers throughout the Australian finance industry that led to its downfall, so it may not be a surprise that multinational banks made similar mistakes.

The period that Citigroup have been lambasted for falls between 2013 and 2017, which is the same kind of time that the Australian major lenders were also carrying out worrying practices of giving poor financial advice and carrying out sales anyway.

According to the Australian Securities and Investments Commission (ASIC), financial advisors for the bank had been selling investment proposals and mechanisms without following proper regulations. With disclosure obligations also not being followed, it seems likely that a series of fines and the expectation of a shift in boardroom governance could be mandated by the regulator in much the same way as it has done with other banks falling foul of the rules.

The legislator has also demanded that any investors who still have capital left in the scheme must be allowed to withdraw "without cost" at any time they state, with complex fixed coupons and capital at risk investment procedures the offending products.

Citigroup said they stopped selling these products without appropriate financial advice once ASIC brought it to their attention, and they have not been on the market since the start of 2018.  Although some customers have yet to receive their monies back, the bank says that some 75% of their clients have been refunded.

This news adds to the feeling that not every ghost has been exorcized from the finance industry in Australia during the middle of this decade. Although much of the reporting covered aspects from the bigger lenders in this country, the fact that a multinational bank such as Citi has also been dragged into it indicates more may be to come.

It also shows that the culture had been allowed to grow roots so deep that it was spreading to most financial institutions, so it will be up to the regulators to prove that they have learnt from past mistakes and establish more of a grip on proceedings. 

Markets
Index: Points Change Percent

PLEASE SUPPORT OUR SPONSORS, AUSTRALIA'S LEADING BROKERS:



© Copyright TheBull.com.au. All rights reserved.