WASHINGTON – Two Citigroup companies on Monday agreed to pay $180 million to settle charges they defrauded investors by misrepresenting that investments in two now-defunct muni-related hedge funds were safe, low-risk and suitable for traditional bond investors.

New York-based Citigroup Global Markets and Citigroup Alternative Investments raised almost $3 billion in capital from about 4,000 investors between 2002 and 2007 through the two funds — ASTA/MAT and Falcon – before they collapsed in 2008 during the financial crisis, resulting in billions of dollars of losses, according to the SEC.

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Without admitting or denying the SEC’s findings, CAI, the investment manager for the two hedge funds, and CGMI, which employed the financial advisors that recommended the funds to investors, agreed to disgorge more than $139. 95 million of ill-gotten gains and pay prejudgment interest of more than $39.61 million to the SEC under the settlement.

Danielle Romero, managing director of global public affairs for Citigroup, said the company is “pleased to have resolved this matter.”

The SEC found the two Citigroup affiliates continued accepting additional investments and assuring investors of the funds’ safety even as they started to decline in late 2007. The “misleading representations” the Citigroup companies made were “at odds with disclosures made in marketing documents and written material provided to investors,” the SEC said in a release.

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The bank will host a meeting with creditors in New York on Monday, Melba Acosta, head of the island’s Government Development Bank, said. That will be the first meeting with creditors since Governor Alejandro Garcia Padilla said a week ago that he wants to restructure its $72 billion debt.

The gathering will focus on a report released last week by three former International Monetary Fund officials that said Puerto Rico is in a dire position because of high debt, unstable finances and a stagnant economy. Governor Alejandro Garcia Padilla on June 29 said he would seek to delay some debt payments for “a number of years.”

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The US Securities and Exchange Commission (SEC) quietly provided a waiver to Citigroup that allows the brokerdealer a pass to “get-out-of-the penalty-box” and retain its “well-known seasoned issuer” status (aka WKSI), enabling the firm to resume selling hedge fund investments to clients of its private bank.

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BOSTON, Aug. 27, 2014 /PRNewswire/ — Rhythm, a biopharmaceutical company developing peptide therapeutics that address gastrointestinal diseases and genetic deficiencies that result in metabolic disorders, announced today that it has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission (SEC) relating to the proposed initial public offering of shares of its common stock. The number of shares to be offered and the price range for the offering have not yet been determined.

Citigroup and Cowen and Company will act as joint book-running managers for the offering. Canaccord Genuity Inc., Oppenheimer & Co., and Cantor Fitzgerald & Co. will act as co-managers. The offering will be made only by means of a prospectus. When available, copies of the preliminary prospectus relating to the offering may be obtained from Citigroup, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, New York 11717, or by email atprospectus@citi.com, or by calling (800) 831-9146, and from Cowen and Company, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, New York 11717, or by calling (631) 274-2806, or by fax at (631) 254-7140.

A registration statement relating to these securities has been filed with the SEC, but has not yet become effective. These securities may not be sold, nor may offers to buy be accepted, prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or a solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful, prior to registration or qualification under the securities laws of any such state or jurisdiction.

Rhythm is a biopharmaceutical company developing peptide therapeutics that address unmet needs in gastrointestinal diseases and genetic deficiencies that result in metabolic disorders. Rhythm is developing the ghrelin peptide agonist, relamorelin (RM-131), for the treatment of diabetic gastroparesis and other gastrointestinal functional disorders; and the MC4R peptide agonist, RM-493, for obesity caused by genetic deficiencies in the MC4 pathway. The company is based in Boston, Massachusetts.

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(Bloomberg) — Citigroup Inc., the third-biggest U.S. brokerdealer, told regulators they could steer more stock trading to public exchanges by making it more affordable.

The bank suggested the U.S. Securities and Exchange Commission cut the highest amount that can be levied to trade by at least two-thirds, according to a letter from Daniel Keegan, head of Americas equities at Citigroup. Most exchanges charge the maximum, 30 cents per 100 shares, leading traders to favor lower-cost dark pools, he wrote. His statement aligns Citigroup, which runs alternative trading platforms, with two of the biggest exchange operators.

Citi’s Daniel Keegan

As part of a rule change that took effect in 2007, the SEC “somewhat arbitrarily established a cap on access fees that can be charged to access liquidity on exchanges,” Keegan wrote in an Aug. 7 letter posted on the regulator’s website. “This cap should be revisited in light of today’s market economics.”

More than 15 percent of U.S. equity volume takes place on dark pools, according to Tabb Group LLC. NYSE Group Inc. and Nasdaq OMX Group Inc., two of the three big U.S. stock exchange owners, have both advocated regulatory measures to lure trading off the systems. Accusations of wrongdoing on the private systems have intensified this year amid Michael Lewis’s “Flash Boys” and a probe by New York’s attorney general, who alleged Barclays Plc misled its dark-pool clients.

Dark pools proliferated in the past decade as brokers sought to reduce the amount of money they pay the NYSE and Nasdaq Stock Market. Instead of giving exchanges trading fees, brokers could match buyers and sellers on their own systems.

The SEC’s Regulation NMS, which took effect in 2007, helped solidify that business model by allowing stock trades to occur on whatever market had the best price at a given time, be it public or private. Reg NMS also set the maximum exchange access fee at 30 cents per 100 shares, also known as 30 mils.

Citigroup’s LavaFlow Inc. division runs the 10th-biggest alternative trading system for U.S. stocks and charges 28 mils for shares priced above $1. It’s an electronic communication network, not a dark pool, meaning more data about trading is publicly available.

Citigroup’s suggestion of reducing the access-fee cap to 10 mils or lower could also restrain rebates that exchanges pay traders who facilitate transactions, a practice known as maker- taker that has been attacked by lawmakers and critics such as IEX Group Inc. and the chief executive officer of NYSE’s owner, Intercontinental Exchange Inc.

Rewarding Brokers

Stock markets use fees from traders to reward brokers who send them orders, a model some academics and money managers such as Invesco Ltd. and T. Rowe Price Group Inc. say creates a conflict of interest. Last month, Senator Carl Levin, a Michigan Democrat, told the SEC it should abolish the payments to improve confidence in U.S. stock markets.

Jeffrey Sprecher, the CEO of ICE, said during a recent congressional roundtable that exchange access fees should be reduced. His company, as well as Nasdaq, have endorsed a proposal called the trade-at rule, which would keep stock trades off dark pools unless those venues improved upon prices available on exchanges.

Nasdaq, operator of the largest exchange by volume, generated $1.1 billion in revenue from U.S. equities transactions in 2013 and gave out $743 million in rebates, according to an SEC filing. The comparable figures at NYSE Euronext, the owner of the New York Stock Exchange that ICE bought in November 2013, were $1.06 billion and $796 million, respectively, in 2012.

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Banks are checking back into the hotel business.

J.P. Morgan Chase JPM +0.63% & Co., Deutsche Bank AG and other firms are ramping up lending for lodging acquisitions and debt refinancing to levels not seen since before the financial crisis. Lenders made $31 billion in hotel loans last year, nearly double the 2012 level, according to the Mortgage Bankers Association, while all commercial-property lending rose 47%.

Credit is flowing against a backdrop of rising room rates, limited new construction and a spike in leisure and business travel in big cities such as New York and Los Angeles. Net operating income increased by 10% for the average U.S. hotel in 2013, according to PKF Consulting USA, which predicts “double digit annual gains” through 2015.

The easy money means hotel companies and investors can use less of their own cash to make deals, potentially amplifying returns. Debt now accounts for more than 67% of a hotel purchase price, up from about 56% in 2010, says PKF. That level is just below the high of around 70% in 2005.

Some of the largest hotel transactions have relied even more heavily on debt. NorthStar Realty Finance and a partner this month borrowed about $840 million from J.P. Morgan to acquire a 47-hotel portfolio for about $1 billion.

“There’s been a sea-change during the past two months,” says Monty Bennett, chief executive officer of Ashford Hospitality Trust, AHT +0.47% a Dallas-based hotel investor. “It’s pretty close to the 2007 lending environment again.”

The full WSJ article can be accessed by clicking here.

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