Sections 17(a)(2) and (3) of the Securities Act of 1933

SEC Settles CDO Suit Against Citigroup

On October 19, 2011, Citigroup agreed to pay $285 million to settle charges that it structured and marketed a $1 billion collateralized debt obligation without disclosing that it had taken a $500 million short position against the CDO. In particular, the complaint, filed as a settled action by the SEC in federal court in New York, alleges that Citigroup Global Markets, Inc. failed to disclose to investors that it influenced the selection of a large portion of the mortgage loans underlying the CDO and then retained a short position in the assets it had helped select. The SEC alleges that this conduct violated Sections 17(a)(2) and (3) of the Securities Act of 1933. The SEC’s related claims against Brian Stoker, a former Citi employee who allegedly structured the CDO, are still pending. Press Release.