The Securities and Exchange Commission has begun an informal probe to determine if Citigroup (NYSE:C) failed to provide material information surrounding the exit of former Chief Executive Vikram Pandit earlier this month.
According to sources, the SEC has not launched an all-out investigation, but is certainly interested in digging up details surrounding Pandit’s October 16 resignation. Both Pandit and Citigroup Chairman Michael O’Neill told investors in conference calls and interviews that the decision to step down was Pandit’s alone.
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However, reports later surfaced that after the markets closed the day before, the board served warning to Pandit that they were no longer confident in his abilities and advised he resign immediately.
Now, the SEC is looking into those allegations. If they are true, Citigroup could be guilty of deceiving investors, as the reason for a CEO’s departure is a matter of material information that must be disclosed. If Citigroup in fact forced Pandit out, then they lied when calling it a resignation.
“If the board pushed Pandit out, then Citigroup issued a false statement,” said former SEC chairman Harvey Pitt. “The reason for the CEO’s departure is material, and Citigroup had an obligation to disclose any information necessary to render its statements fair, accurate and complete. If the board forced Pandit out, Citigroup didn’t do that.”
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