According to news reports here, Victor Menezes, the former head of emerging markets for Citigroup Inc., has received a Wells notice from the US Securities and Exchange Commission and may face a federal insider-trading lawsuit, said the NASD, formerly known as the National Association of Securities Dealers.
The India-born Menezes retired from Citigroup (Research) at the end of last year.
The SEC will investigate a large sale of stock that Menezes made in 2002 -- worth $29.8 million -- a little more than two weeks before an earnings report about losses in its investments in Argentina was released.
Menezes, however, will have a chance to reply before the SEC goes ahead, since the Wells notice is only a notification of the SEC's intent to accuse the individual of wrongdoing.
The NASD is a self-regulatory organisation for the securities industry.
Reports said that an SEC filing showed that Menezes sold 597,000 Citigroup shares on March 28, 2002. He also exercised options to buy shares at the same time. Eventually, Menezes ended up more owning more shares than he
sold.
A Citigroup spokeswoman speaking on behalf of Menezes was reported as saying that Menezes exercised employee stock options to buy Citigroup shares on March 28, reports said.
Although this exercise involved a stock sale, Menezes at that time increased his ownership of Citigroup stock by 234,004 shares, the spokeswoman was reported as saying.
On April 15, Citigroup disclosed that its Argentine unit, then under Menezes' supervision, had generated $2.2 billion of losses because the South American nation, whose economic woes have been the subject of much analysis in developmental economics circles, defaulted on its debt.
Citigroup shares fell that day to a six-week low. Two months later, the bank stripped Menezes of his day-to-day responsibilities for emerging markets.
In April 2004, Menezes, by then a senior vice chairman, decided to retire.