Citigroup, Everbright, Rajaratnam, Libya: Compliance

Citigroup Inc. may reach a $7 billion agreement with federal prosecutors that would include about $4 billion in cash to resolve a civil probe into sales of mortgage-backed bonds, a person familiar with the negotiations said.

An agreement with the U.S. Justice Department could be reached before Citigroup reports second-quarter earnings on July 14, according to the person, who asked not to be identified because the negotiations are private. Another person briefed on the talks said no final agreement will be reached before next week.

About $3 billion of the settlement would come through other forms of payment such as consumer relief, one of the people said.

Mark Costiglio, a spokesman for New York-based Citigroup, declined to comment on the talks.

The lender offered less than $4 billion and prosecutors sought more than $10 billion, a person familiar with the matter said last month. The Wall Street Journal reported July 8 that an agreement might be near.

Compliance Policy

Prime Money Funds to Float Price in Plan Said Headed to SEC Vote

The riskiest money-market mutual funds will have to let their share prices fluctuate and charge investors withdrawal fees during times of stress under tougher U.S. rules set for adoption this month.

The Securities and Exchange Commission is poised to impose both requirements on some money-market mutual funds, which required a federal rescue during the 2008 financial crisis, according to a person familiar with the matter who asked to not be named because terms of the final rule haven’t been made public.

Key parts of the proposal have been strongly opposed by the funds’ trade group, the Investment Company Institute, and fund-management company Federated Investors Inc. over concerns the rule would destroy demand for prime institutional funds.

The proposal is likely to be voted on by the commission on July 23, the person said. The rule would not apply to retail funds or those that predominantly invest in U.S. government and municipal securities.

An SEC spokeswoman, Gina Talamona, declined to comment on the report.

Compliance Action

Everbright Says China Regulators Drop Proprietary-Trading Limit

The China Securities Regulatory Commission removed restrictive measures on proprietary trading it had imposed on Everbright Securities Co., according to a statement from the company to the Shanghai Stock Exchange, citing a notice from the commission.

The restrictions were lifted because the company has rectified its problems, Everbright said in the statement.

China’s securities regulator Aug. 30 imposed a record penalty on the company after finding it engaged in insider trading.

Rengan Rajaratnam Wins Not-Guilty Verdict in Less Than 4 Hours

Rengan Rajaratnam, the younger brother of imprisoned Galleon Group LLC co-founder Raj Rajaratnam, was found not guilty of insider trading.

Federal jurors in Manhattan deliberated for less than four hours July 8 before concluding that Rajaratnam, 43, a former Galleon portfolio manager, wasn’t guilty of conspiracy. Several jurors said evidence was lacking.

The verdict was the government’s first trial loss in a wide-ranging probe that has led to 85 convictions of traders, analysts, lawyers and executives, with most sentenced to prison. Raj Rajaratnam, the first to be arrested in October 2009, is serving 11 years.

Several jurors on the panel of eight women and four men said Rajaratnam was charged only because he was caught on wiretaps talking to his brother.

The case is U.S. v. Rajaratnam, 13-cr-00211, U.S. District Court, Southern District of New York (Manhattan). A pending Securities and Exchange Commission case is SEC v. Rajaratnam, 13-cv-01894, U.S. District Court, Southern District of New York (Manhattan).

Comings and Goings

Libya’s $66 Billion Wealth Fund Replaces Chairman Amid Probe

The Libyan Investment Authority replaced its chairman, Abdulmagid Breish, amid an investigation under Libya’s “political isolation law” into his role in the government of ousted leader Muammar Qaddafi, the authority said.

Breish is being replaced by Abdurahman Benyezza, a former minister for oil and gas.

Breish, the agency’s chairman and interim chief executive officer for 13 months, led the sovereign wealth fund into billion-dollar lawsuits against Societe Generale SA and Goldman Sachs Group Inc. over 2008 investment losses. He said he would appeal to the country’s Constitutional Court.

“I’m totally confident and comfortable with what I’ve done at the LIA,” he said in a phone interview. “I’m confident in the management and the board of the LIA to continue to progress the work that is in process.”

Under Breish, the authority, which has assets of about $66 billion, was attempting reforms. He planned to entrust much of its assets to external investment managers.

The authority said in a statement it planned to continue the suits against Goldman Sachs and SocGen.

Before it's here, it's on the Bloomberg Terminal.