The Securities and Exchange Commission (SEC) will vote this morning on Citigroup Inc.’s proposed agreement to pay between $200 million and $300 million to settle fraud charges associated with its sale of a $1 billion mortgage-bond deal that was backed by subprime mortgages.
In 2007, Citigroup created a Class V Funding III, a $1 billion mortgage-bond deal. SEC commissioners have been investigating whether the bank misled investors in the deal, which was a collateralized debt obligation (CDO)—a derivative product whose payments come from bonds or mortgages—created from other CDOs that were backed by risky subprime mortgages.
According to the Wall Street Journal, Citigroup’s proposed settlement, if approved, would be one of the highest payments made to the SEC to settle charges.
The Wall Street Journal reports that the SEC also will announce a parallel settlement—probably less than $5 million, according to people involved in the matter—with Credit Suisse Group AG, which was a collateral manager on the deal.