Citigroup has been sending letters to hedge fund firms informing them that it cannot sell investments in hedge funds and private-equity funds to clients after a deal with the US Securities and Exchange Commission (SEC), the Wall Street Journal reported.
The bank this month reached a US$285 million fraud settlement with the regulator over a complaint concerning a 2007 sale of mortgage-linked securities debt that caused more than US$700 million of investor losses.
Citigroup said in the letter to hedge fund firms that it was working with the SEC to resolve the issue, the newspaper reported.
However, the bank is allowed to sell private investments to large institutions, the publication said.
The restriction is the result of the "bad actor" rule adopted by the SEC in July of last year, which bars companies or individuals with a criminal conviction that occurred after September 2013 from participating in private offerings.