Friday, March 31, 2006

Citigroup facing $715M fine for insider trading

SYDNEY, Australia (Reuters) - Australia's securities regulator Friday accused Citigroup Inc. of illegal insider trading on a $3.3 billion bid by transport company Toll Holdings Ltd. for rival Patrick Corp.

Citigroup's Australian arm denied any wrongdoing regarding the deal. It had advised Toll, one of Australia's biggest shipping firms, on the offer for Patrick last year.

In its first such case against a company, the Australian Securities and Investment Commission (ASIC) said it had identified substantial trading in Patrick shares by Citigroup's own accounts on Aug. 19, the last business day before Toll announced its bid on Aug. 22.

Shares in Patrick jumped 13 percent on Aug. 19, with about 20.5 million shares sold or nearly 3 percent of shares on issue. After the bid was announced, they jumped another 14 percent.

"This is a significant case raising two very important issues for the securities industry: having adequate arrangements for managing inside information and dealing with conflicts of interest," the commission's deputy chairman, Jeremy Cooper, said.

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