Deals & People October 6, 2009

Citi Advisers Will Switch to Fee-Only, Partner with RIAs

Citi announced that financial advisers at Citibank branches will no longer provide commission-based transactions.

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Citi said advisers in its retail investment unit Citi Personal Wealth Management will provide fee-only investment advisory services. “This model is where the market is headed and it will help us offer clients greater flexibility, transparency, and meaningful investment choices,” said Terri Dial, head of North America Consumer Banking and Global Consumer Strategy.

Furthermore, Citi said it will work with independent registered investment advisers (RIAs) to complement its services and cover more geographic area. The bank said it is in discussion with independent RIAs and expects to announce agreements over the next several months.

“We also expect to recruit advisers at other firms who are considering becoming independent investment advisers, as this will be an appealing alternative for many of them,” said Deborah McWhinney, head of Citi Personal Banking and Wealth Management.

As part of the shift to a fee-only business model, Citi Personal Wealth Management will also offer clients access to an open platform designed to support the fee-based business, the bank said. By 2011, Citi hopes to eliminate commission-based compensation to its advisers, transition advisers to function solely as investment advisory representatives, and establish agreements with independent RIA firms around the country.

Compliance October 6, 2009

Payroll Employee Charged with Stealing 401(k) Plan Money

A former payroll administrator for a Houston recycling company has been indicted for stealing paychecks and 401(k) plan money.

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United States Attorney Tim Johnson announced that an investigation conducted by the Department of Labor and FBI led to the return of a 15-count indictment on July 1. Maria Teresa Cardenas is charged with multiple counts of wire fraud, embezzlement from an employee benefit plan, and identity theft.

According to the announcement, the indictment alleges that during a two-year period beginning in 2004, Cardenas caused the company to issue paychecks to a former employee with a name similar to her own and then deposited the paychecks into her own personal bank account. It also alleges that she caused an employee benefit plan management company to issue checks drawn on the 401(k) accounts of other employees or former employees, forged signatures of the payees, and deposited the checks into her bank account.

Each of the five wire fraud counts carries a maximum statutory penalty of 20 years imprisonment, upon conviction. The seven embezzlement counts carry maximum statutory penalties of five years imprisonment. The three aggravated identity theft charges each carry a mandatory statutory penalty of two years imprisonment, which must be served consecutively to any sentence imposed for a wire fraud or embezzlement conviction. In addition to prison terms, each of the 15 counts also carry a statutory maximum fine of $250,000.

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