Citigroup Facing Enforcement Action By SEC Over Transfer Agency Comings And Goings

Citigroup says the Securities and Exchange Commission (SEC) is considering enforcement action related to the entry of the bank into the transfer agency business in the late 1990s. The SEC investigation was first disclosed by Citigroup in November 2003. Citigroup

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Citigroup says the Securities and Exchange Commission (SEC) is considering enforcement action related to the entry of the bank into the transfer agency business in the late 1990s. The SEC investigation was first disclosed by Citigroup in November 2003.

Citigroup said in an SEC filing late on Tuesday that the SEC is considering recommending a civil injunctive action or an administrative proceeding relating to the mutual fund unit’s internal transfer agency business. It is not clear what actions of Citigroup were under the scrutiny of the SEC.

Most of Citigroup’s transfer agency business is still internal, but the company is outsourcing some work to companies that specialize in transfer agency work.

Civil injunctive actions and administrative proceedings are types of actions the SEC can bring against a company. Civil lawsuits take place in federal court while administrative proceedings are conducted before an administrative law judge within the SEC.

In 1999, Citigroup moved transfer agency in-house, and then subcontracted some of the work back out to a company that originally did its transfer agency. Citigroup received revenue of about $17 million as part of this sub-contracting arrangement. Citigroup disclosed last November that it was passing this revenue and interest on it to certain funds within its Smith Barney family of funds.

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