Citi Private Bank Barred From Selling Alts.

Aug 25 2014 | 10:27am ET

Citigroup’s $285 million mortgage-backed securities settlement has cut it out of the hedge-fund sales business, at least for the time being.

Under the Securities and Exchange Commission’s new “bad actor” rule, adopted last year, firms with “a relevant criminal conviction, regulatory or court order or other disqualifying event” are barred from participating in private offerings. That means that Citi isn’t allowed to sell hedge-fund or private-equity investments to high-net worth clients, although it can still arrange sales to large institutions.

Citi has told hedge funds over the last two weeks of the new restrictions. Prior to the Aug. 5 approval of its settlement, it had offered access to about 40 hedge funds, including Och-Ziff Capital Management, to clients of its private bank.

Citi will require a waiver from the SEC to resume those sales, The Wall Street Journal reports, a process that could take time—and that could run into opposition from some on the commission.

Other banks that have reached similar deals with regulators are not covered by the provision because they finalized their settlements prior to the bad-actor rule’s adoption. But Citi’s settlement, which it reached in 2011, was initially rejected by U.S. District Judge Jed Rakoff, who said it did not go far enough. Rakoff was reversed on appeal, forcing him to approve the deal earlier this month.

But by initially rejecting the settlement, Rakoff inadvertently gave it more teeth by delaying its approval until after the bad-actor rule had come into effect.


In Depth

Why Ponzi Schemes Work: An In-Depth Look At The Allen Stanford Fraud

Dec 21 2014 | 10:30am ET

Texan Allen Stanford first appeared on the radars of financial regulators in 1997...

Lifestyle

Hedgie Funds US Squash Program

Dec 24 2014 | 8:46am ET

Squash, anyone?

Guest Contributor

EidoSearch’s Top Three Market Projections For 2015

Dec 23 2014 | 4:03am ET

It is that time of year again when prognosticators make their big market calls for...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.