Citigroup May be Charged Over Transfer Agency Fees
February 7, 2005
Citigroup has announced 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.
The SEC's proposed actions are related to Citigroup Trust, a transfer agent serving more than 20 of the company's closed-end funds.
Citicorp Trust sub-contracted a number of transfer agent services when it entered the business in 1999, guaranteeing investment management revenue to Citigroup Asset Management and investment-banking revenue to an affiliate.
Later, PFPC, a unit of PNC Financial Services Group, took over the sub-contractor business, eliminating the revenue guarantee. Citigroup Asset Management, however, received a one-time payment from the subcontractor but failed to reveal that payment or the earlier revenue guarantee to the boards of the funds. The SEC is involved in the case because of the company's failure to make those disclosures to PFPC. Citigroup said it had set aside $196 million during the second half of last year related to this case. The company also said it is cooperating fully with the SEC and was hoping to reach a settlement soon.