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Thursday, August 07, 2008

Citi Reaches Settlement Over Securities Probe

FOXBusiness

Citgroup has reached a settlement with the Securities and Exchange Commission’s Division of Enforcement and New York Attorney General, Andrew Cuomo for more than $7 billion. The settlement mandates the company buy back the auction-rate securities that it sold to its customers.

“This resolution will make a big difference for a lot of people,” Cuomo said in a press conference on Thursday. “Over 40,000 people nationwide…will have securities redeemed and the total value of securities is about $7 billion, so it affects a lot of people, I believe it will help restore confidence in this marketplace and in these difficult financial times it’s a positive resolution that does justice for consumers."

Last week, Cuomo threatened to sue the company for “repeatedly and persistently” omitting and misrepresenting facts when marketing and selling auction-rate securities, according to the Wall Street Journal.

Citi will have three months, or until Nov. 5, to buy back the auction-rate securities from the individual investors, small businesses, and charities that purchased them.

The agreement also requires the Citi “to use its best efforts” to liquidate the near $12 billion in auction-rate securities it sold to institutional investors and retirement plans by the end of 2009.

Citigroup will make two $50 million civil penalty payments; one to the state of New York and the other to the North American Securities Administrators Association.

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