Update to Citigroup ASIC matter

Further details are now available to update my prior post about the Citigroup ASIC investigation, as reported by Reuters in a wire story Friday 31 March 2006 15:22:35 AEST by Daniel Morrissey, editing by Richard Pullin.

According to the Reuters report (which I have re-arranged somewhat),
Citigroup denied all the charges made by ASIC.

Citigroup is extremely disappointed by the action taken today by ASIC because we don not believe ASIC has any basis of a claim and that this is an attempt to regulate the proprietary trading desks which are a feature of all major investment banks," a Citigroup spokeswoman said.

Australia's corporate policeman said on Friday a Citigroup Inc. subsidiary engaged in insider trading on a A$4.6 billion bid by transport group Toll Holdings Ltd. for rival Patrick Corp. Ltd.

[ASIC] said it had identified "substantial proprietary trading" by Citigroup in Patrick shares on Aug. 19, the last business day before Toll announced its share-and-cahs bid on Aug. 22. "This is a significant case raising two very important issues for the securities industry: having adequate arrangements for managing inside information and dealing with conflicts of interest", ASIC Deputy Chariman Jeremy Cooper said.

The watchdog has filed civil penalty proceedings in the Federal Court of Australia seeking, among other things, a declaration Citigroup broke Australia's corporation law. The case is before the court on April 28.

Citigroup, the world's biggest bank by market value, faces a fine of up to A$1 million if the court rules in favour of ASIC. ASIC also said it was seeking orders that Citigroup put in place adequate procedures for dealing with conflicts of interest and to stop Citigroup trading in shares on its own account while advising clients with an interest in the price of those shares.

Toll said the legal action would not affect its hostile takeover offer for Patrick, Australia's largest ports operator. "Toll retains Citigroup as investment adviser in the Patrick offer," the company said in a statement.