Citigroup is being sued by the Australian securities regulator for insider trading against the interests of a client it was advising. The US bank has denied the claim.
The Australian Securities and Investments Commission (ASIC) said that when Citigroup acted as an adviser to Toll Holdings in its $4.6 billion takeover bid for Patrick Corporation in August 2005, the bank traded in Patrick securities the last business day before Toll made an announcement of the bid to the market.
ASIC’s Deputy Chairman Jeremy Cooper said: ASIC is saying that Citigroup fell down on both fronts in relation to its role as adviser to Toll. ASIC alleges that Citigroup traded on inside information and directly against the interests of its client, Toll.
Citigroup has denied the claims. Citigroup is extremely disappointed by the action, the bank said. It is an attempt to regulate the proprietary trading desks which are a feature of all major investment banks. Citigroup pointed out that other banks also profited that day in trading on Patrick stock as rumors of the takeover reached investors.