Subject:  Citigroup to pay $208M to settle SEC fraud charges |
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Date Posted: 12:41:12 05/31/05 Tue
Citigroup to pay $208M to settle SEC fraud charges
Citigroup to pay $208M to settle SEC fraud charges
By Greg Morcroft, MarketWatch
Last Update: 1:54 PM ET May 31, 2005
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NEW YORK (MarketWatch) -- Two Citigroup Inc. subsidiaries have agreed to pay $208 million to settle fraud charges relating to the creation and operation of an affiliated transfer agent that has served the Smith Barney family of mutual funds since 1999, the Securities and Exchange Commission said Tuesday.
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The SEC found that Citigroup Global Markets Inc. and Smith Barney Fund Management LLC, the investment adviser to the mutual funds, misrepresented and omitted material facts when recommending to the boards of the mutual funds that the funds change from the third party transfer agent they previously used to a transfer agent that was a Citigroup affiliate.
Without admitting or denying the findings, Citigroup (C: news, chart, profile) agreed to pay $128 million in refunds and interest, $80 million in penalties.
"We are pleased to resolve this matter," Citigroup President and COO Robert Willumstad said in a prepared statement. "We recognize that aspects of the transfer agency arrangements entered into six years ago did not reflect the way we think business should be done, and that is unacceptable," he added.
The company also agreed to comply with remedial measures including putting certain contracts for transfer agency services for the mutual funds out for competitive bids.
"Fund advisers owe a duty of undivided loyalty to the funds they serve," said Linda Chatman Thomsen, the Director of the Commission's Division of Enforcement.
They must disclose to the funds all material information regarding their compensation and the benefits they receive and all
http://www.marketwatch.com/news/story.asp?guid=%7B1DDE0151-B29C-4A5E-9471-C063581E3481%7D&siteid=google
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