SEC Says Citigroup ‘Misconduct’ Led to Investors Losing $700 Million

The Securities and Exchange Commission (SEC) stated in a court document filed Monday that at the start of the mortgage meltdown, investors were misled by Citigroup about a housing-related investment and as a result they lost more than $700 million in the deal. SEC also said that all the investor losses were “not necessarily” the result of misconduct and as such it would accept $285 million from Citigroup to settle their cases against the company.

SEC said that the Citigroup made profits of at least $160 million on the transaction. As per the settlement, Citigroup will have to give up its alleged ill-gotten gains of $160 million and pay interest of $30 million in addition to a $95 million penalty, making a total payment of $285 million. However, Citigroup neither admits nor denies wrongdoing under the proposed settlement. Only one mid-level employee at the subsidiary has been charged in the case and he is fighting the charges.

Better Markets, an advocacy group, has asked for rejection of the Citigroup settlement. Dennis Kelleher, the group’s president, said in a statement that “Unfortunately, the SEC seems more interested in issuing press releases and wrapping up its investigations than punishing Wall Street for its massive frauds. Such settlements don’t deter crime. They reward it.”

Although the settlement is modest in comparison to Citigroup’s third-quarter profit of $3.8 billion, SEC has defended it as “fair, adequate and reasonable.”

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U.S. Stock Futures Retract from Last Week’s Gains

Weighed down by weakness in overseas markets and apprehensions of investors regarding the key readings on the U.S. economy this week, U.S. stock futures pulled back from the sharp gains observed at the end of last week. Dow Jones Industrial Average plunged 89 points to 12,079. The Dow rose 524 points over the last three sessions to extend its month-to-date gains to 1,318 points. As such, the Dow is on track if it does not slip more than 315 points on Monday. If so, it will create the biggest monthly gain in its 115-year history.

Futures on Standard & Poor’s 500-stock index fell 12 points to 1,269 and Nasdaq 100 futures slumped 19 points to 2,378. It is worth noting that changes in stock futures don’t always accurately predict stock moves after the opening bell.

Europe was broadly lower in overseas markets with the Stoxx Europe 600 down 1.3%, as some investors were skeptical about the effectiveness of last week’s plan to resolve the euro-zone’s debt crisis. Doubts regarding the strength of the economy also lowered investors’ sentiments.

The Organization of Economic Development and Cooperation said Monday that some advanced economies could have persistent runs of weak growth and high employment and that the GDP of the euro zone was expected to rise only 0.3% next year instead of the previous forecast of 2%.

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