Today FINRA ( The Financial Regulatory Authority) fined Citi International Financial Services LLC, a subsidiary of Citigroup, Inc. $600,000 and ordered restitution to 3,600 customers totaling $648,000 for charging excessive markups and markdowns on bond transactions and other supervisory issues. Here is a link to the press release.
Markups and markdowns are the differences between what a broker pays or sells a bond for and what he sells or buys it from you for. It is the undisclosed profit ( the "spread") that firms make when buying and selling your bonds. For example, if the broker purchases a bond for $99 and sells it to you for $100, the markup is $1.
The SEC doesn't require brokers to disclose how much they make on bonds they sell to you. To protect yourself you may want to go to Investing in Bonds.com , enter the cusip number of the bond and get information about what the bond has been trading for recently. Generally 1-2% markup is ok.
In the Citi case, FINRA found that from July 2007 to September 2010, they had charged excessive markups and markdowns, ranging from 2.73-over 10%.
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