FINRA Arbitrators Sanction Citigroup for Delayed Currency Conversion of Loonie to US Dollar

August 30, 2011

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in April 2010, public customer George Putnam asserted various causes of action including breach of contract, negligence, and fraud arising out of a dispute involving Citigroup Global Market's alleged delay in converting his funds from Canadian dollars to United States dollars, and, thereafter, timely depositing the converted funds into his account. In the Matter of the FINRA Arbitration Between George Putnam, Claimant vs. Citigroup Global Markets, Inc., Respondent (FINRA Arbitration 10-01847, August 26, 2011).

Respondent Citigroup generally denied the allegations and asserted various affirmative defenses.

The FINRA Arbitration Panel found Respondent Citigroup liable and ordered it to pay Claimant Putnam $127,943.88 in compensatory damages plus interest at 10% per annum from October 14, 2008, until the award is paid.

Bill Singer's Comment

No - I can't provide more details because the above is about all the information presented in the FINRA Arbitration Decision. Sadly, I don't know how long the conversion delay was or whether there were any peculiar issues further delaying the timely deposit into the customer's account of the converted funds.  Once again, we're victimized by FINRA's policy of issuing relatively bare-bones Decisions.

On the other hand, as short as the fact-pattern in this case is, it does raise a number of red flags for many brokerage customers.

If you anticipate the need to deposit foreign currency into your US brokerage account (whether you are a US or foreign customer), you should confirm the manner in which your funds will be converted.  For example, what formula/benchmark does the brokerage firm use to calculate the conversion rate and how quickly will the transaction settle?

In some cases, you may find it cheaper to use a third party to convert your foreign funds and subsequently deposit US dollars into your account.  If you anticipate frequent resort to currency conversion to fund your brokerage account, you should negotiate with your broker more competitive conversion rates than those typically offered.

Also, if time is of the essence in converting foreign currency, memorialize your communications with your broker.  At a minimum, obtain (or send a confirmatory) email that specifices the conversion rate and promised time of completion of the conversion and ensuing deposit of cleared funds into your brokerage account.  The date and time of that email may prove critical in any disputes over the conversion.