DENVER—Colorado will receive $1.24 million in a settlement between Citigroup Global Markets Inc. and state securities regulators over auction rate securities, regulators said Wednesday.
New York-based Citigroup Inc. agreed last year to a settlement with the Securities and Exchange Commission to buy back about $7 billion in securities from affected customers.
Regulators had alleged Citigroup marketed auction rate securities as being as safe and liquid as cash, but many customers found they couldn’t withdraw money from their accounts after markets froze in February 2008. Regulators also investigated other firms.
In auction rate securities markets, investors trade what resembles corporate debt, but interest rates are reset at frequent auctions, sometimes weekly.
Under the settlement, Citigroup will offer to repurchase at par all auction rate securities from retail customers in Colorado who held those securities when the auction market failed Feb. 12, 2008, Colorado Securities Commissioner Fred Joseph said Wednesday. That includes individual investors, charities and businesses with account values of up to $10 million.
Citigroup also will reimburse investors who sold their auction rate securities at a discount after the market failed, provide liquidity to other institutional investors, and reimburse refinancing fees to state municipal issuers who issued auction rate securities through Citigroup between Aug. 1, 2007, and Feb. 11, 2008, and who refinanced those securities after Feb. 11, 2008.
Citigroup also agreed to a public arbitration procedure to resolve claims of consequential damages suffered by retail investors who couldn’t access their funds.
“This settlement represents a major victory for investors who for months have been unable to access their funds at Citigroup because those funds were placed in auction rate securities,” Joseph said. “Securing a liquidity solution for investors has been the primary objective of our investigations, and this agreement achieves that goal.”
