The U.S. Securities and Exchange Commission (SEC) has reached a US$18.3-million settlement with New York-based Citigroup Global Markets Inc. for allegedly overcharging advisory clients and misplacing the contracts of other clients, who also may have been overcharged.

The sanctions include a US$14.3-million penalty, US$3.2 million in disgorgement of excess fees and US$800,000 in interest. Citigroup also consented to a cease-and-desist order, and agreed to undertakings related to its billing and recordkeeping practices.

According to the SEC’s order, at least 60,000 clients were overcharged approximately US$18 million in unauthorized fees because “Citigroup failed to confirm the accuracy of billing rates entered into its computer systems in comparison to fee rates outlined in client contracts, billing histories, and other documents.”

In addition, the SEC’s order says the firm improperly collected fees when clients had suspended their accounts. The affected clients have since been reimbursed, the regulator notes.

“Advisory clients have every expectation that the fees charged by their financial advisor reflect the negotiated rate. Citigroup failed to take the necessary precautions to ensure clients were billed in a manner consistent with their advisory agreements,” says Andrew Calamari, director of the SEC’s New York office, in a statement.

The SEC’s order also notes that the firm is unable to locate approximately 83,000 advisory accounts opened between 1990 and 2012, which makes it hard to determine whether those clients were also overbilled. Nonetheless, the SEC estimates that the firm received approximately US$3.2 million in excess fees from clients whose contracts were lost.

“It’s a fundamental responsibility of a financial advisor to preserve key account documents such as advisory contracts,” says Sanjay Wadhwa, senior associate director of the SEC’s New York office, in a statement. “Citigroup failed to safeguard its client contracts, which seriously impeded its ability to determine the proper amount of fees the firm was authorized to charge.”