(Photo: Reuters)
(Photo: Reuters)

Citigroup has agreed to pay a substantial settlement to investors, who bought the bank\'s debt and preferred stock in the two years leading up the one of the world\'s worst financial crisis\', after claiming they were misled by the company\'s disclosure.

In a statement on their website, the third-largest US bank says that, subject to court approval, it will pay $730m (£484m/€564m) to settle a class action lawsuit brought on behalf of investors who purchased the bank\'s debt and preferred stock during the period 11 May 2006 through 28 November 2008.

While the bank still denies allegations that it misled investors it says it is entering into this settlement \"solely to eliminate the uncertainties, burden and expense of further protracted litigation.\"

\"This settlement is another significant step toward resolving our exposure to claims arising from the financial crisis, and we look forward to putting this matter behind us,\" the group said in a statement.

\"Citigroup is a fundamentally different company today than at the beginning of the financial crisis. We have overhauled risk management and reduced risk exposures, while shedding assets and businesses that are not core to our strategy. We are completely focused on our clients and generating consistent, high-quality earnings,\" it added.

Citigroup says that the proposed settlement is covered by its existing litigation reserves.

The law firm representing the investors in the class action lawsuit, Bernstein Litowitz Berger & Grossmann LLP (BLB&G), says in a statement on its website that the settlement \"comes after more than four years of protracted litigation, including the denial of defendants\' motions to dismiss and a massive and intensive discovery effort that involved more than 70 depositions.\"

The Citigroup bond litigation was filed five months ago on behalf of purchasers of 48 offerings of Citigroup preferred stock and bonds issued from 2006 through 2008.

BLB&G says that the action contends that Citigroup conducted a series of public offerings prior to the collapse of the subprime mortgage market based on \"offering documents that contained material misrepresentations and omissions regarding Citigroup\'s exposure to billions of dollars in mortgage-related assets.\"

The class action lawsuit, In re Citigroup, Inc. Bond Litigation, Master File No. 08-cv-9522 (S.D.N.Y.), is to be reviewed by the Hon. Sidney Stein in the United States District Court for the Southern District of New York.

The settlement is the latest in a line of regulator and investor complaints, litigation and investigations into banks selling financial products or fund around the time of the onset of the credit crisis.

In October this year, IBTimes UK reported that RBoS Shareholders Action Group will be launching a £4bn lawsuit against Royal Bank of Scotland Group Plc and three ex-senior executives, Fred Goodwin, Tom McKillop and Jonny Cameron, after claiming its members bought the shares under false pretences as the bank did not fully disclose how frail the bank\'s health was in its prospectus, which then led to the government bailing it out.

Meanwhile, last month, the UK\'s Financial Services Authority hit UBS with a fine following the mis-selling and a series of failings in a fund sale that left nearly 2,000 investors exposed to the type of financial instruments that brought on the global financial crisis.

The FSA issued the Swiss bank with a £9.45m fine for a series of failings in the sale of the AIG Enhanced Variable Rate Fund, which led to 1,998 high net worth customers being \"exposed to an unacceptable risk\" and a high proportion being mis-sold the product.

The UK watchdog said that unlike a standard money market fund, UBS\' AIG fund sought to deliver an enhanced return by investing a material proportion of the Fund\'s assets in asset backed securities and floating rate notes.