CITIGROUP settled with the US Securities and Exchange Commission (SEC) for $285m last night over a case involving derivatives sold before the financial crisis, saying it was “pleased to put this matter behind us”.
The SEC had accused Citi of negligence when it advertised certain derivatives to customers without disclosing that it had helped to select the underlying assets in the instruments and had short positions in some of them.
Citi denied the accusation and argued that while it had short positions on some of the collateral for the derivatives, it also held $100m’s worth of the instruments itself in various subsidiaries and had long positions in other, similar products.
The derivatives in question were collateralised debt obligations (CDO) sold at the height of the property boom in 2006 and early 2007, making the case just the latest in a string of suits generated from the fallout of the financial crisis.
Citi was not forced to admit any wrongdoing in the settlement.
US authorities in particular are keen to go after banks for what they say was inadequate disclosure of possible conflicts of interest in selling many complex financial products.