Citigroup faces securities probe

Citigroup has received subpoenas from agencies in New York and Texas

Citigroup has revealed that it is the subject of an investigation by the US financial regulator into whether it broke securities law.

The inquiry centres on the sale and marketing of auction-rate securities, a form of bond often used by municipal authorities to raise funds.

Regulators are looking into whether their risk was mis-stated.

The banking giant said it and other unnamed firms had received subpoenas from agencies in a number of states.

These include New York, Texas and Massachusetts.

It disclosed the actions in its regular quarterly filing to the Securities and Exchange Commission.

Citigroup declined to comment on its discussions with regulators, but in a statement it said: "Since the beginning of the Auction Rate Securities liquidity crisis Citi has worked diligently with issuers, investors and regulatory authorities to obtain liquidity for holders of illiquid ARS."

The company has so far revealed $40bn (£20bn) of losses on its investments linked to the collapse of the sub-prime mortgage market and the global credit crunch.

It has lost more on these investments than any other financial institution.