Citigroup appears to be planning a jump into the correspondent clearing business, as suggested by its recent hiring of Jim DeAlto, a top executive from Bank of American BrokerDealer Services (BofA BD), and as reported last week in Securities Industry News.
BofA BD has been given a black eye from its role in enabling problematic mutual fund trading and may soon be approaching a sale, according to SIN.
Last fall, DeAlto took over the top slot at BofA BD, which recently has catered largely to broker-dealers servicing institutional clients. He replaced Kevin Browne, who left the firm following revelations of the clearer’s role in aiding a hedge fund to trade in the mutual funds managed by its parent and other fund companies. Leaving in April, DeAlto started at Citigroup on May 3 at the urging of a longtime friend who holds a senior position at the global financial giant, sources said.
A Citigroup spokeswoman told SIN that DeAlto had been hired for his sales experience in the clearing arena and now holds the title of director at the firm. She declined to comment further.
Sources close to Citigroup say that the financial giant is currently examining the feasibility of starting up a correspondent clearing business. DeAlto has been given approximately two years to build the operation, they say, which most likely will focus on institution-oriented correspondents, since that’s where DeAlto’s expertise lies. DeAlto has worked in the clearing business for more than 10 years, they added.
Meanwhile, Bank of America is still looking to sell its BofA BD clearing unit, as a part of a tentative agreement in March with the Securities and Exchange Commission that allowed it to acquire Fleet Financial. That agreement also included paying a $125 million penalty and returning $250 million to investors in its mutual funds.