Corp-Ethics.com - Report: Citigroup reaches SEC settlement

Company	CitiGroup [Company Info]
	Track this Company (an email will be sent to you everytime a report is filed about this company)

Date	Issue	Title
7th Aug 2008	Questionable Practice	Citigroup reaches SEC settlement

Report

Finance firm Citigroup is set to buy back billions of dollars worth of securities, as part of a settlement with the US financial regulator.

The deal with the Securities and Exchange Commission (SEC) comes after an investigation into whether the bank breached securities rules.

The SEC had looked at the sale and marketing of a bond often used by municipal authorities to raise funds.

It looked into whether the bank mis-stated the risk of the securities.

The SEC said Citigroup had failed to inform customers of the true risks involved in auction-rate securities.

It is just another problem for Citigroup, which is trying to recover after writing off billions of dollars as a result of the US sub-prime crisis.

Citigroup marketed and sold auction-rate securities as safe, cash-equivalent products, when in fact they faced increasing liquidity risk.

New York State Attorney General Andrew Cuomo said the agreement was a turning point for investors seeking relief from the collapse of the auction-rate securities market.

“Today’s settlement sends a resounding message to the entire auction-rate securities industry," said Mr Cuomo.

"This type of deceptive behaviour will not be tolerated and we will actively seek justice on behalf of investors in auction rate securities.

“Our goal is simple: to get investors back their money, and that’s exactly what this deal does.”

Citigroup agreed to buy back all illiquid auction-rate securities at face value from all retail customers, charities and small-to-mid-sized businesses, by 5 November.

These customers, who number approximately 40,000 nationwide, have been unable to sell their securities since 12 February.

Their securities are worth more than $7bn (£3.6bn).

The bank also agreed to fully reimburse all investors who sold their auction-rate debt at a loss.

Citigroup will pay a $50m penalty to New York and another $50m to the North American Securities Administrators Association.

"This is not just a Wall Street issue, this is a Main Street issue," Mr Cuomo said.

He said the settlement "will help restore confidence in this market" and added, "It does justice for consumers."

Meanwhile, also on Thursday, Bank of America said it had received subpoenas and requests for information from various state and federal regulators regarding its sale of auction-rate securities.

In a filing with the SEC it said subsidiaries Banc of America Investment Services and Banc of America Securities LLC are cooperating fully with the requests.

It said it received subpoenas, interrogatories or civil investigative demands from a number of state attorneys general regarding municipal derivatives transactions from 1992 to the present.

Separately it said Countrywide Financial, the mortgage firm it bought last month, has responded to subpoenas from the SEC and faces a formal investigation

Other Reports on CitiGroup
Date	Issue	Company	Report
10th May 2006	Other Issue	CitiGroup	Citibank overcharged customers in Japan
28th Jun 2005	Other Issue	CitiGroup	Citigroup fined £14m by UK watchdog
10th Jun 2005	Fraud Investigation	CitiGroup	Citigroup pays $2bn in Enron case
25th Jan 2005	Fraud Investigation	CitiGroup	Criminal probe on Citigroup deals
4th Oct 2004	Fraud Investigation	CitiGroup	South Korea to scrutinise Citigroup
17th Sep 2004	Questionable Practice	CitiGroup	Japan closes Citigroup branches
11th May 2004	Fraud Investigation	CitiGroup	Citigroup settles Worldcom claims
19th Jun 2003	Other Issue	CitiGroup	Citicorp Brokerage Executive Fired

Related Reports from the Banking Industry
Company	Issue	Report
Cooperative Bank	Other Issue	Bank Promotes Ethical Trade
Bank One	Fraud Investigation	Funds scandal costs Bank One $90m
National Australia Bank	Questionable Practice	NAB rebel head quits amid scandal
Allied Irish	Questionable Practice	Allied Irish admits overcharging
Bank of America	Fraud Investigation	Bank of America agrees to pay fines