SEC probes Citi on mortgage securities deal

THE US Securities and Exchange Commission (SEC) is investigating Citigroup’s role in a $1bn mortgage-backed securities deal in 2007.

Citigroup “improperly pushed an independent manager to put specific assets” in a collateralised debt obligation (CDO) it created in February 2007. The deal, which was backed by other CDOs that were backed by slices of subprime mortgages, was managed by Credit Suisse Alternative Capital.

Citigroup said in a regulatory filing earlier this month that it “continues to cooperate fully in response to subpoenas and requests for information from the Securities and Exchange Commission”.

Spokeswoman Danielle Romero-Apsilos declined to comment on the specific probe yesterday but said in an email: “It’s been widely reported that there are ongoing industry-wide investigations into CDO-related matters.”

Shareholders have also sued Citigroup over its CDOs and other securities, claiming the bank knowingly misled them about the value of and risk related to the securities.
A judge dismissed parts of the lawsuit earlier this month, but allowed the investors to pursue some of their CDO-related claims.