Wall Street companies cheat investors to maximize earnings, share prices, and executive bonuses.
When they are caught, companies pay fines to make the problem go away.
The latest example is Citigroup’s agreement to pay a $285 million fine to settle an SEC action that stated it sold investors $1 billion of a CDO then bet against the performance of the CDO. Investors lost $700 million and Citigroup made $160 million.
Citigroup is one of the biggest financial institutions in the world. If you can’t trust Citigroup, who can you trust?
Citigroup agreed to pay the fine without admitting guilt. If they didn’t do anything wrong why did they agree to pay the fine?
First of all, fines are a cost of doing business for Wall Street firms. They probably have a contingency fund to pay fines.
Second, they want the “problem” to go away as quickly as possible to minimize adverse publicity.
Third, Wall Street knows investors have very short-term memories. Very shortly, Citigroup’s alleged fraud will be yesterday’s news and it will be business as usual. I bet not one investor pulled their Citigroup accounts because the “problem” did not impact them.
What about the investors who lost the $700 million? Can they still afford to retire when they want to? Can they maintain their desired standard of living during retirement?
What about the executives who made millions from their decisions to package toxic assets and sell them to investors?
What about the fiduciary responsibility to always put investor interests first? I know the answer to this one. Brokerage firms are not held to fiduciary standards. Shame on FINRA and the SEC.