Citigroup discloses formal SEC probe

August 1, 2008 by · Leave a Comment
Filed under: Industry News 

Citigroup Inc said on Friday the U.S. Securities and Exchange Commission has opened a formal probe into possible violations of federal securities laws in connection with the sale of auction-rate securities.

The largest U.S. bank by assets also said it is responding to subpoenas from state agencies, including in Massachusetts, New York and Texas, concerning the securities.

Separately, the bank said it is cooperating with government and regulatory requests regarding bank-managed hedge funds.

The New York-based bank disclosed the regulatory matters in its quarterly report filed with the SEC. An SEC spokesman did not immediately return a call seeking comment.

Auction-rate securities have rates set periodically. The $330 billion market was once considered safe, but part of it remains frozen after a February meltdown in which brokerages abandoned their role as buyers of last resort.

Regulators nationwide are examining auction-rate sales practices of banks and brokerages such as Citigroup, Bank of America Corp, Merrill Lynch & Co, UBS AG and Wachovia Corp.

Investigators are examining whether various brokers might have misrepresented the safety of the securities, likening them to investments considered almost as safe as cash.

Citigroup spokeswoman Christina Pretto said the bank is cooperating with the probes, and has been working with issuers, investors and regulators to create liquidity for holders of illiquid auction-rate debt.

Click Here to Continue Reading

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!