The move comes as Citigroup learned earlier this week that federal prosecutors are investigating Citigroup Asset Management (CAM) for the “errors.” After learning about the indiscretions, Citigroup said it briefed the US Securities and Exchange Commission (SEC), New York Attorney General Eliot Spitzer and other regulators, and will cooperate with government authorities, according to a Reuters report.
Thomas Jones, the chief executive of CAM expressed regret for the errors. Jane also told senior management in a memo that “as we currently understand the facts,” the firm received the excess funds under a “revenue transfer agreement” with an unnamed subcontractor. This in turn will lead to an independent review of the bank’s transfer fee structure, Jane said in the memo.
The “errors” were uncovered as Citigroup was reviewing documents requested by the SEC. During the review, the bank focused on its entry into the transfer agent business from 1997 to 1999.
Initially, Citigroup and the subcontractor agreed that it would “guarantee certain benefits to CAM or its affiliates.” However, later Jones said Citigroup agreed to eliminate the benefits in exchange for a one-time payment and other arrangements.
“Neither the agreement nor the amendment was disclosed to the Boards of CAM’s proprietary funds at the time the Boards were considering whether to approve the transfer agent arrangements or subsequently,” Jones said according to Reuters. “These errors never should have occurred and we deeply regret that they did.”