Thursday, April 14, 2011


In what is being reported as the largest Award ever issued by a FINRA panel in favor of an individual investor, Citigroup was ordered to pay over $50 million to two individual investors. The Award includes $17 million in punitive damages and $3 million in legal fees, despite severe limits on the ability to garner punitives and fees in FINRA arbitrations.

As reported in yesterday's Wall Street Journal, the two victorious investors dealt with the same broker at SmithBarney. Beyond the magnitude of the Award, this case is highly unusual in that the broker testified on behalf of the investors. It is unfortunate that this is such an unusual event because the broker's purported testimony is hardly incredible—the broker-dealer misled the broker about the level of risk associated with the municipal bond fund at issue.

Cosgrove Law, LLC has a claim pending against Fisher Investments in which its client alleges that it was misled as to the risk associated with Fisher's 100% equity fund in 2008. According to Fisher's marketing materials, the portfolio was designed to avoid substantial losses due to asset allocations within the portfolio and the hands-on stewardship of Mr. Fischer and his Investment Policy Committee. Ironically, a Fisher Analyst recently published an article in which he states, in part, “Folks...constantly exhibit huge overconfidence in their own great ideas, and display continuous belief they somehow have insights the rest of the world hasn't thought of.” According to the Fisher Investments Education Center, however, “The Fisher Investment Policy Committee…continuously monitors these drivers to ascertain if any of them are indicating an extreme reading, and if so, whether the market has discounted the factors yet. Only material readings not believed to be fully discounted into pricing are acted upon.” Fisher Investments also purports to “discover unique sources of information to exploit inefficiencies uncovered through unique analysis of widely available information.”

Both the Cosgrove Law, LLC client and the Citigroup clients lost over 50% of their portfolio’s value during the market downturn. Fisher Investments denies liability, as did Citigroup. The SEC is reportedly investigating Citigroup, and it will not confirm or deny the existence of an investigation of Fisher Investments.

The Wall Street Journal article can be located at An article regarding a prior SEC and NASD investigation of Fisher Investments can be located at

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