By Austen Hufford

Morgan Stanley and Citigroup Inc. will each pay nearly $3 million to settle Securities and Exchange Commission charges that they falsely advertised a foreign-exchange trading program they sold to investors.

Representatives of both firms pitched a foreign-exchange trading program called "CitiFX Alpha" to Morgan Stanley customers from August 2010 to July 2011. The SEC alleges that during their presentations, customers weren't told that they could be placed into the program using more leverage than advertised, and that markups would be charged on each trade.The two banks didn't admit or deny the findings. Spokeswomen for both companies said they are pleased to have the matter settled.

"Investors simply cannot be sold investments based on disclosures that are inaccurate or incomplete," Eric Bustillo, director of the SEC's Miami office, said.

The SEC says the past performance history and risk metrics presented assumed the accounts were fully collateralized, meaning the amount traded was equal to how much was in the account, and that no markups would be charged on trades. The SEC says that neither assumption was true.

After the financial crisis, Citigroup and Morgan Stanley combined their wealth-management units in a joint venture called Morgan Stanley Smith Barney. Citigroup sold its remaining stake in the unit to Morgan Stanley in 2013. At the time of the allegations, Citigroup held a 49% stake in the unit.

The two banks each agreed to pay back $624,458.27, interest of$89,277.34 and a fine of $2.3 million, for a combined total of $5.9 million.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

January 24, 2017 14:37 ET (19:37 GMT)

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