Citigroup (C), Goldman Sachs Group (GS) and two other Wall Street brokerages agreed to pay a total of $20 million to settle allegations they overcharged clients for high-yield corporate bonds, a regulatory group said on Wednesday.

The penalties, also levied againstDeutsche Bank (search) and Miller Tabak Roberts Securities LLC (search), are the largest to date in the continuing investigations of markups in the $6.5 trillion corporate and municipal bond markets.

According to the NASD (search), a group that regulates brokerages, the four companies marked up bonds by as much as 32 percent, when the legal limit is generally 5 percent.

The NASD fines involved institutional investors like mutual funds or pension funds, which on average face transaction costs in the corporate bond market that are comparable to those in the stock market, said Arthur Warga, dean of the University of Houston's C.T. Bauer College of Business.

"But there are some cases where something wrong is done," Warga said.

The trades involved were executed between 2000 and 2002, when dealers were required to report only a handful of corporate bond trades to regulators. Since 2002, every corporate bond trade has been reported to NASD, and more violations may be found as that data is analyzed and investigated.

"Any action like this will have a deterrent effect, but the bigger impact will be from making bond price information public," said Edith Hotchkiss, a professor in the finance department at Boston College who has studied the influence on the bond market of releasing price information.

The NASD has proposed rules that would make prices on nearly all U.S. junk bond trades public. But dealers have protested that in the $700 billion junk bond market, the rules would force Wall Street dealers to release sensitive information to their competitors, discouraging them from buying bonds for their inventories.

In the fines announced on Wednesday, each of the four companies agreed to pay $5 million to settle with NASD. But they neither admitted nor denied the allegations.

The NASD found that the four companies charged excessive markups when selling securities to investors and paid too little when buying securities from investors.

Markups or markdowns generally should not exceed 5 percent, and for most securities, that figure should be lower, the NASD said in a statement.

Citigroup marked prices up or down anywhere from 13.1 percent to 32.2 percent on three pairs of trades, while Goldman marked prices down anywhere from 9.4 percent to 30.4 percent, NASD said.

Although determining the proper price to charge clients can be difficult in the junk bond market, particularly in the distressed debt market, where these trades took place, for the trades in question dealers were buying the security from one investor and selling to another in short order, removing pricing ambiguities.

NASD also fined the companies for inadequate record keeping and deficient supervision. The four companies were given 60 days to revise their written guidelines for supervising such trades.

All four companies were ordered to make restitution payments, with Citigroup paying $486,000, Deutsche Bank paying $422,000, Goldman paying $344,000, and Miller Tabak Roberts paying $182,000.

A spokesman for Goldman Sachs and a representative of Miller Tabak Roberts declined to comment.

Spokespeople for Deutsche and Citigroup said their respective banks were pleased to have the matter resolved.