PR: </td> <td nowrap>Nov. 19, 2001</td> <td>Alan Beller to Be Next Director of the Commission’s Division of Corporation Finance </td></tr> <tr valign=top> <td nowrap>
he...@sec.gov
FOR IMMEDIATE RELEASE 2001-139
STATE BANK OF INDIA AND CITIBANK, N.A. SETTLE SEC CHARGES INVOLVING
AN UNREGISTERED SECURITIES OFFERING
Washington, DC, November 19, 2001 - The Securities and exchange
Commission announced today that it has issued an order against the
State Bank of India (SBI) and Citibank, N.A. (Citibank) finding that
they violated federal securities laws by selling Resurgent India
Bonds (RIBs) in the United States without filing a registration
statement with the SEC.
The Order finds that between August 5, 1998 and August 24, 1998,
SBI directly, and through the marketing efforts of a subsidiary and
Citibank, raised approximately $532 million in the U.S. by selling
RIBs to Non-Resident Indians (NRIs) and entities owned or
controlled by NRIs. Of that amount, Citibank sold approximately
$160 million of the bonds.
Under the Order, to which SBI and Citibank consented without
admitting or denying the SEC's findings, the SEC directs both SBI
and Citibank to cease violating Sections 5(a) and (c) of the
Securities Act.
The Orders findings include:
SBI, the largest commercial bank in India, with offices in New York
City (SBI New York), Washington, D.C., Chicago, Los Angeles and San
Jose, announced in July 1998 that it hoped to raise more that $2
billion of foreign currency worldwide through the sale of RIBs. SBI
entered into agreements with Citibank and others to act as brokers
to seek subscriptions from eligible investors in the United States
and throughout the world. Also in July 1998, SBI appointed
collecting banks, including SBI New York and Citibank, to act as
regional centers where applications would be collected, processed
and forwarded to SBI.
In SBIs pre-offering announcements, the RIBs were described as five-
year denominated instruments carrying interest rates as high as 8%,
transferable outside of India, and giftable within India. The
announcements also stated that only NRIs and their affiliated entities
could purchase the RIBs, and that the proceeds of the offering would
be used mainly for infrastructure development in India.
In the United States, SBI and Citibanks NRI Services division
principally conducted the marketing of the RIBs. Those marketing
efforts were widespread and aggressive, and specifically targeted
approximately one million NRIs living in the United States, many of
whom were also United States citizens. Those marketing efforts
included, for example, mass mailings to approximately 90,000 NRIs
as well as cold calls placed by both employees and agents of Citibank
and SBI.
SBIs marketing campaign featured the name RESURGENT INDIA BOND,
which SBI and its subsidiary displayed in all of their marketing
materials in large bold capital letters. SBIs and Citibanks
marketing materials repeatedly referred to the RIBs as bond[s] and
investment[s], and frequently used terms commonly associated with
securities offerings. Citibanks marketing materials also touted
characteristics of the RIBs that are similar to government bonds,
such as: (1) tax benefits; (2) transferability; and (3) proceeds to
be used for infra-structure projects in India. While using such
terms as bond and investment, some of Citibanks documents also
described the RIBs as 5-year fixed return deposit[s].
SBI directly raised $182 million from approximately 12,000 NRIs
and partnerships, corporations and other entities principally
owned by NRIs. Citibank directly raised approximately $160
million from at least 5,000 NRIs and partnerships, corporations
and other entities principally owned by NRIs.
The Order finds that the RIBs are securities and that SBI and
Citibank violated Sections 5(a) and (c) of the Securities Act
by offering and selling the RIBs when the offering of such
securities was not registered with the SEC. The Order issued
today orders respondents to cease and desist from committing
or causing any violation and any future violation of Sections
5(a) and 5(c) of the Securities Act.
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