Citigroup Global Markets has agreed to pay $18.3 million to settle charges by the US Securities and Exchange Commission that it overbilled HNW investment advisory clients and misplaced contracts that it had signed with them.

The SEC’s cease-and-desist order finds that at least 60,000 advisory clients were overcharged approximately $18 million in unauthorised fees because Citigroup failed to confirm the accuracy of billing rates that it had keyed into its computer systems in comparison while also losing track of fee rates outlined in contracts that it had signed with clients, billing histories and other documents. Citigroup also improperly collected fees during periods when clients were suspending their accounts. The billing errors occurred during a 15-year period and the bank has already reimbursed the HNWs whom it has wronged.

The regulator’s order states that Citigroup cannot locate approximately 83,000 advisory contracts for accounts opened between 1990 and 2012. Without them, it cannot properly work out whether the fee rates negotiated by clients when accounts were opened were the same advisory fee rates that it was asking clients to pay over the years. The regulator guesses that Citigroup received approximately $3.2 million in excess fees from advisory clients whose contracts were lost.

The SEC says that it is a fundamental responsibility of every financial advisor to preserve key account documents such as advisory contracts.  It believes that Citigroup failed to safeguard its client contracts, which seriously impeded its ability to determine the proper amount of fees that it was authorised to charge.

Citigroup consented to the SEC’s cease-and-desist order and agreed to undertakings related to its fee-billing and books-and-records practices. The firm must 'disgorge' $3.2 million in excess fees that it collected as a result of the missing contracts, plus $800,000 in interest and a $14.3 million penalty.