Investors Yield First Significant Win In MAT Five Case
Investors in a municipal arbitrage hedge fund known as MAT Five have been awarded more than $1.7 million by a Los Angeles Financial Industry Regulatory Authority (FINRA) arbitration panel.
The MAT Five fund specialized in municipal arbitrage - highly leveraged financial activities in which fund managers hedge tax-free municipal bonds against riskier taxable corporate bonds. When Citigroup first launched MAT Five, investors thought they were investing in a relatively low-risk, conservative fixed-income alternative that had the volatility of Lehman Brothers Aggregate Bond Index.
In reality, MAT Five was a risky investment. According to evidence presented to the FINRA arbitration panel, the fund exposed investors to a 100% more loss of principal, was 2.5 times more volatile than the S&P 500 and 7.8 times more volatile than a traditional portfolio of municipal bonds.
“When confronted with evidence that Citigroup misrepresented MAT’s risk level to its brokers, who then passed the misleading information on to their clients, a high ranking Citigroup official testified that it was “unwise” for customers of the firm to have relied on what their brokers had told them about an investment that had been recommended by the firm,” said Steven B. Caruso, a partner of Maddox Hargett & Caruso P.C., one of the several law firms that provided legal counsel to the plaintiffs.
In addition to the $1.7 million award in favor of investors, the arbitration also assessed the entire cost of the hearing against Citigroup Global Markets.
Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.
