Citigroup announced Friday that the Securities and Exchange Commission may recommend a civil injunction and/or administrative proceedings against Citigroup Asset Management, Citicorp Trust Bank, former asset management unit CEO Thomas Jones and three other people, Reuters reports.
The SEC's proposed actions are related to Citigroup's creation and operation of an internal transfer agent serving more than 20 Citigroup-managed closed-end funds.
Citicorp Trust sub-contracted a number of transfer agent services when it entered the business in 1999. The subcontractor struck a separate deal with Citigroup Asset Management in 1998, guaranteeing investment management revenue to Citigroup Asset Management and investment banking revenue to an affiliate.
Later, PFPC Inc., a unit of PNC Financial Services Group, took over the subcontractor business, eliminating the revenue guarantee. Citigroup Asset Management's affiliate, however, received a one-time payment from the subcontractor.
The SEC is involved in the case because Citigroup Asset Management did not disclose the revenue guarantee when Citicorp Trust started serving as a transfer agent to the various Citi closed-end funds. Citigroup Asset Management did not disclose the one-time payment either, Citigroup said.
On Thursday, Citigroup said it had set aside $196 million during the second half of last year related to this case.
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