The Securities and Exchange Commission has settled charges of fraud against two Citigroup subsidiaries, related to the use of an affiliated transfer agent that had been serving the Smith Barney mutual funds. The company has consented to the order without admitted to or denying the charges, and is set to pay $128 million in disgorgement and interest and $80 million in penalties.

"Fund advisers owe a duty of undivided loyalty to the funds they serve," said Linda Chatman Thomsen, director of the SEC's division of enforcement. "They cannot place their own interests above the funds' interests, and they cannot hide the ball."

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