Corporate & Securities Law

Investors Win MAT Three Municipal Arbitrage Fund Complaint

By Steven Caruso

A Los Angeles Financial Industry Regulatory Authority (FINRA) arbitration panel has awarded investors more than $550,000 in damages for their complaint involving a fixed-income municipal arbitrage investment known as MAT Three.

Created and launched by Citigroup Global Markets and sold through Smith Barney in February 2006, MAT Three was represented as a fixed-income alternative product - an investment that supposedly had similar volatility to that of the Lehman Brothers Aggregate Bond Index. In reality, the highly leveraged fund exposed investors to 100% or more loss of principal and 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 MAT Three imploded in February 2008, investors suffered devastating losses.

?Despite widespread evidence that Citigroup misrepresented MAT?s risk level to its own brokers, who then passed the misleading information on to their clients, Citigroup elected to employ the ?blame the customer? defense,?? stated Steven B. Caruso of Maddox Hargett & Caruso, P.C. ?The FINRA arbitration panel obviously rejected this defense.?

Maddox Hargett & Caruso, P.C. and Aidikoff, Uhl & Bakhtiar provided legal representation to the investors in the case.

The award represents a return of 100% of the investors? losses, according to Caruso, who says that the win is the second significant investor win in a MAT case for his firm?s clients in recent weeks.

Full post as published by Representing Investors on June 03, 2010 (boomark / email).