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January 17,2017

By E-mail and Overnight Courier

Timothy Henseler, Esq.

Division of Corporation Finance

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Re:

In the Matter ofCitigroup Global Markets, Inc.

Dear Mr. Henseler:

We are writing on behalf of our clients Citigroup Inc. ("Citigroup") and Citigroup Global

Markets Holdings Inc. ("CGMHI") (collectively, "Citi") in connection with the anticipated

settlement of the above-captioned administrative proceeding ("Proceeding") brought against

Citigroup's wholly-owned indirect subsidiary, Citigroup Global Markets, Inc. ("CGMI"), by the

U.S. Securities and Exchange Commission ("SEC" or "Commission"). CGMI is a registered

broker-dealer and investment adviser with the Commission.

Citigroup is a publicly-traded company listed on the New York Stock Exchange

(NYSE:C) and is a reporting company under the Securities Exchange Act of 1934, as amended

("Exchange Act"). Citigroup qualifies as a "well-known seasoned issuer" ("WKSI") as defined

in Rule 405 under the Securities Act of 1933, as amended ("Securities Act"). CGMHI is a

wholly-owned subsidiary of Citigroup, and securities issued by CGMHI are fully and

unconditionally guaranteed by Citigroup.

Citi respectfully requests a waiver from the Commission or the Division of Corporation

Finance ("Division"), acting pursuant to its delegated authority, determining that it is not

necessary under the circumstances that Citi be considered an "ineligible issuer," as defined in

Rule 405 under the Securities Act, as a result of the Commission order arising from the

Proceeding (the "Order"), which is described below. Consistent with the framework outlined in

the Division's Revised Statement on Well-Known Seasoned Issuer Waivers (April24, 2014)

("Revised Statement"), we respectfully submit that there is good cause for the Commission or

the Division, acting pursuant to delegated authority, to grant the requested waiver, as discussed

below. Citi requests that this determination be effective upon the entry of the Order.

Sidley Austin (NY) LLP is a Delaware lim~ed liability partnefllhip doing business as Sidley Austin LLP and practicing in aniliation with other Sidley Austin partnefllhips.

ACTIVE 216070982v.l 0

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January 17, 2017

Page2

BACKGROUND

Accordingly, CGMI and the staff ofthe Division of Enforcement are in the process of

formalizing the settlement that will include an offer of settlement in which, solely for the purpose

of proceedings brought by or on behalf of the Commission or to which the Commission is a party,

CGMI will consent to the entry of an Order without admitting or denying the matter set forth in the

Order, except the jurisdiction of the Commission and the subject matter of the proceeding.

The Order will fmd violations of the federal securities laws by CGMI in connection with a

FX trading program known as Alpha, which was developed by CGMI and followed by customers

of Morgan Stanley Smith Barney LLC ("MSSB"). The Order will find that CGMI misled MSSB

customers by failing to adequately disclose that investors could be placed into the program using

substantially more leverage than was disclosed and that mark-ups would be charged on each trade.

Under the terms of the Order, the Commission will:

(i)

require CGMI to cease and desist from committing or causing any violations or any

future violations of Sections 17(a)(2) ofthe Securities Act; and

(ii)

require CGMI to pay disgorgement of$624,458.27, prejudgment interest of

$89,277.34, and a civil monetary penalty in the amount of$2,250,000.00.

DISCUSSION

A WKSI is eligible to utilize significant reforms in the securities offering and

communication processes that the Commission adopted in 2005. 1 These reforms have changed

the way corporate finance transactions for larger issuers are planned, brought to market and

executed. Among other things, a WKSI can register securities for offer and sale under an

automatic shelf registration statement, which becomes effective upon filing and is also eligible

for the other benefits of the streamlined registration process, such as the ability to file

automatically effective post-effective amendments to register additional or new types of

securities and pay registration filing fees on a "pay as you go" basis. Furthermore, a WKSI is

also able to communicate more freely than a non-WKSI during the offering process, including

through the use of free writing prospectuses.

1

See Securities Offering Reform, Securities Act Release No. 8591, Exchange Act Release No. 52,056, Investment

Company Act Release No. 26,993, 70 Fed. Reg. 44,722,44,790 (Aug. 3, 2005).

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Timothy Henseler, Esq.

January 17, 2017

Page 3

The Commission also created another category of issuer under Rule 405 - the "ineligible

issuer." A company cannot qualify as a WKSI if it is an "ineligible issuer." Accordingly, a

company that becomes an ineligible issuer loses all of the benefits bestowed on a WKSI,

including, and most importantly, the ability to utilize an automatic shelf registration statement

and post-effective amendments thereto and to use free writing prospectuses (except in very

limited circumstances). Rule 405 deems an issuer ineligible when, among other things, "[w]ithin

the past three years ... the issuer or any entity that at the time was a subsidiary of the issuer was

made the subject of any judicial or administrative decree or order arising out of a governmental

action that: (A) prohibits certain conduct or activities regarding, including future violations of,

the anti-fraud provisions of the federal securities laws; (B) requires that the person cease and

desist from violating the anti-fraud provisions of the federal securities laws; or (C) determines

that the person violated the anti-fraud provisions of the federal securities."2 An ineligible issuer

is excluded from the category of"well-known seasoned issuer" and is thus prohibited from

taking advantage ofthe significant securities offering reforms referred to above.

The entry of the Order against CGMI would make Citi an ineligible issuer under Rule

405 for a period of three years, absent a determination by the Commission or the Division,

pursuant to delegated authority, to the contrary.

Securities Act Rule 405 authorizes the Commission to determine, "upon a showing of

good cause, that it is not necessary under the circumstances that the issuer be considered an

ineligible issuer." 3 In the Revised Statement, the Division stated that it will consider the

following factors in determining whether to grant a waiver:

•

the nature of the violation and whether it involved disclosure for which the issuer

or any of its subsidiaries was responsible or calls into question the ability ofthe

issuer to produce reliable disclosure currently and in the future;

•

whether the alleged misconduct involved a criminal conviction or scienter-based

violation;

•

who was responsible for the misconduct and the duration of the misconduct;

•

what remedial steps the issuer took; and

2

17 C.F.R. 230.405(1 )(vi).

3

17 C.F.R. 230.405(2).

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Timothy Henseler, Esq.

January 17, 2017

Page4

•

the impact if the waiver request is denied.

For the reasons set forth below, we respectfully submit that there is good cause for the

Commission and/or the Division to determine that granting the waiver would be consistent with

the public interest and the protection of investors.

REASONS FOR GRANTING A WAIVER

Under the facts and circumstances of this action and considering the conduct involved as

described in the Order, Citi respectfully submits that granting Citi a waiver from ineligible issuer

status is in the public interest and that according ineligible issuer status on Citi is not necessary

for the protection of investors. In making this request, Citi has carefully considered the Revised

Statement and, as discussed in more detail below, believes that the granting of the waiver request

would be consistent with the policy statement.

A.

The Nature ofthe Violations and Whether the Violation Casts Doubt on the

Ability ofthe Issuer to Produce Reliable Disclosures to Investors

The conduct described in the Order does not pertain to any disclosures provided by Citi

in documents filed with the Commission and does not involve any intentional misconduct by Citi

or CGMI. As discussed above, the conduct described in the Order involves CGMI's failure to

adequately disclose that investors could be placed into the Alpha program using substantially

more leverage than was disclosed and that mark-ups would be charged on each trade. The

conduct involved only CGMI- an indirect subsidiary of Citigroup -and involved only one of

CGMI's programs. The conduct addressed in the Order does not pertain to activities undertaken

by Citi in connection with Citi' s role as an issuer of securities (or any disclosure related thereto).

No conduct by Citi and no conduct in respect ofCiti's disclosures are implicated. Furthermore,

the individuals who were arguably involved in the conduct described in the Order were not

involved in any ofCiti's disclosures.

The disclosure violation described in the Order does not pertain to activities undertaken

by Citi in connection with Citi' s role as an issuer of securities (or any disclosure related thereto)

or otherwise involve fraud in connection with Citi's offerings of its own securities. The

violations in the Order do not involve misstatements or omissions in Citi' s disclosures and do not

call into question the reliability ofCiti's disclosure or its ability to produce reliable disclosure in

the future. Furthermore, the Order does not find that Citi's disclosure controls and procedures or

filings with the Commission during this time period were deficient.

Accordingly, the violations described in the Order do not call into question the ability of

Citi to provide reliable disclosure currently and in the future.

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January 17, 2017

Page 5

B.

The Order is Not Criminal in Nature and Does Not Involve Scienter-Based Fraud

The Revised Statement indicates that the Division "will review whether the conduct

involved a criminal conviction or scienter-based violation as opposed to a civil or administrative

non-scienter based violation."4 The Order does not involve a criminal conviction and does not

state that CGMI acted with scienter or intent to defraud. The conduct occurred at a subsidiary

level and none of the violations described in the Order are scienter-based. Rather, the Order

charges a violation of Section 17(a)(2) of the Securities Act, which violation can be established

by a showing of negligence.

C.

The Persons Responsible for the Misconduct and the Duration ofthe Misconduct

The conduct at issue in the Order neither involves Citi- the issuer- nor any allegations

related to public disclosures of Citi. No current or former employees of CGMI, Citi or their

affiliates have been charged in this matter, and the Commission did not allege that any members

of the board of directors or senior management of Citi, CGMI or their affiliates engaged in any

deliberate misconduct or were aware of violative conduct or ignored any warning signs or "red

flags" regarding the conduct. Furthermore, the Order will not make any findings that suggest the

conduct described in the Order involved the senior management of CGMI, Citi or their affiliates.

Rather, the employees in the FX Value Added Products Group or on the sales desk marketing FX

services who were even arguably involved in the statements the Order will find to have been

misleading did not hold positions higher than that of vice president or director, in one instance,

and only one such person supervised others. The above referenced persons have separated from

CGMI and its affiliates.

The conduct in the Order occurred almost five years ago and was of a limited duration ­

from August 2010 until July 2011. The Order will find that CGMI personnel and MSSB

financial advisors pitched the Alpha program to investors and, in some instances, CGMI

personnel led presentations in which MSSB financial advisors particjpated. The Order will also

find that, in other instances, MSSB financial advisors pitched the Alpha program themselves

using written materials that CGMI had created. The written materials regarding the Alpha

program did not contain all of the details of the program and such details were not otherwise

conveyed to MSSB customers. As discussed below, CGMI discontinued the Alpha program in

December 2011- well before the commencement of the SEC's investigation regarding the

program. 5

4

See Revised Statement

5

The Alpha program was discontinued for business reasons.

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Timothy Henseler, Esq.

January 17,2017

Page 6

D.

Remedial Steps

CGMI maintains robust policies and procedures related to the use of marketing or

promotional materials and requires that all promotional or marketing materials be reviewed and

approved by local legal and/or compliance prior to their use. In December 2011, on its own

initiative, CGMI discontinued the Alpha program at issue in the Order. Over the last five years,

CGMI has improved its processes for approval of programs like the Alpha program, including

the disclosures related thereto. These new and/or enhanced processes are intended to help

prevent conduct such as that in the Alpha program from occurring in the future.

1.

Benchmark and Index Governance Committee

In response to new industry and regulatory standards on financial benchmarks, Citigroup

has taken steps to strengthen its internal control framework over the development, maintenance,

calculation, and publication of quantitative indices, including the establishment of a Benchmark

and Index Governance Committee (the "IGC"). The IGC is focused on managing risk (including

operational risk) associated with administration of certain of Citigroup' s quantitative indices and

has been mandated to provide internal oversight of such indices including reviewing, scrutinizing

and challenging all aspects of index design, the integrity of the index determination process and

relevant control frameworks relating to such indices. Therefore, if a·business unit within CGMI

is seeking to conduct business that is index-related (e.g., a program like Alpha), such business

must go through the IGC. Pursuant to its Charter, the IGC may also delegate certain work

streams to one or more working groups, the composition of which is determined by the IGC, and

could include working groups formed to develop input to procedures to be approved at the IGC

level, focusing on areas such as trading signals, for example. The IGC maintains a set of Index

Governance Procedures, which sets out certain procedural guidelines relating to such oversight

by the IGC. Further, the IGC may escalate any significant matter and/or material issue relating

to one or more indices to the Citigroup Benchmark Steering Committee, a separate committee

responsible for providing oversight on Citigroup index administration and submission activities

more broadly. The quantitative indices overseen by the IGC are subject to a periodic review

process.

If a program similar to the Alpha program were proposed today and the related index or

trading signals were determined to be a financial benchmark, then, regardless of which Citigroup

Legal vehicle is the booking entity (i.e., whether CGMI, or otherwise) it will be subject to

Citigroup's Global Financial Benchmark Administration Policy ("Benchmark Policy"). Pursuant

to the Benchmark Policy, Citigroup is required to establish an oversight function responsible for

the oversight ofCitigroup's Benchmark Administration activity through the IGC (or any other

committee mandated to carry out oversight of such activity). The terms of reference for the IGC

are generally guided by index governance standards set by the IOSCO Principles and issues

ACTIVE 216070982v.IO

Timothy Henseler, Esq.

January 17, 2017

Page 7

considered by the Committee include, among others, the objective of the index or trading signal

and how the methodology seeks to achieve the objective, key assumptions and associated key

risks, distribution (including target market), the extent of methodology disclosure (including all

material components and risks, such as, but not limited to leverage, fees and deductions

(including any notional execution costs or spread charges embedded within an index or trading

signal)), inputs (whether these are based on third party inputs or internal pricing inputs), and

management of potential conflicts of interest between an index and products proposed to be

linked to that index.

The composition of the IGC is such that it provides a balanced representation of a range

of internal stakeholders (including, among other control functions, Legal, Compliance, Model

Validation, Market Risk, US Bank Regulatory) when considering Benchmark related matters

(including the launch of a new index or trading signal) and is designed to mitigate any potential

conflicts of interest. The IGC is expected to regularly report its deliberations to the Citigroup

Benchmark Steering Committee (the "BSG") and may escalate any significant matter and/or

material issue relating to benchmarks to the BSG, comprised of representatives from Markets

and Securities Services business and associated risk and control functions (including Internal

Audit). The BSG is responsible for providing broad oversight ofCitigroup's benchmark related

and associated activities (e.g., overseeing formulation and distribution of standard governance

and control frameworks attributable to benchmark activities).

The fully constituted IGC first held a meeting in January 2015 and has been convened on

a regular basis to discuss benchmark related issues since.

2.

Training

Pursuant to the Benchmark Policy referenced above, all personnel involved in

Benchmark Administration must complete Benchmark Policy training. Refresher training is

provided on an annual basis.

Furthermore, CGMI employees who are subject to the annual training requirements of the

Financial Industry Regulatory Authority ("FINRA") or the Municipal Securities Rulemaking

Board ("MSRB") ("Markets Employees") are required to attend an annual compliance meeting.

The annual compliance meeting covers a variety of topics, including sections related to

compliance with CGMI's policies and procedures regarding communications with the public and

the obligation to follow proper channels within CGMI when new products are proposed to ensure

that they are properly reviewed and approved prior to the commencement of the new activities.

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January 17, 2017

Page 8

E.

Previous Actions

As the staff is aware, Citigroup has previously been granted waivers regarding its WKSI

status in the following instances: (a) CGMI's settlement with the Commission on May 31, 2006

in connection with the marketing and sale of auction rate securities; (b) CGMI' s settlement with

the Commission on December 23, 2008 in connection with the marketing and sale of auction rate

securities; (c) CGMI' s settlement with the Commission on September 26, 2014 in connection

with its 2007 marketing of a collateralized debt obligation structured by CGMI; (d) Citicorp's

entry of a plea agreement with the U.S. Department of Justice on May 20, 2015 in connection

with an antitrust violation arising from the behavior of a foreign exchange trader; (e) CGMI' s

settlement with the Commission on June 18, 2015 in connection with its self-reported failures to

conduct adequate due diligence when underwriting certain municipal securities offerings; (f)

CGMI and Citigroup Alternative Investments LLC's settlement with the Commission on August

17, 2015 in connection with the marketing of two alternative investment hedge funds; and (g)

CGMI's settlement with the Commission on August 19,2015 in connection with CGMI's

monitoring of trading activity and the inadvertent routing of certain advisory orders to one of

CGMI's affiliated market makers.

A prior settlement, in 201 0, involved the reliability of Citigroup' s disclosures. There,

Citigroup itself (not CGMI or another affiliate) entered into a settlement with the Commission in

connection with alleged material misstatements in Citigroup's disclosures filed with the

Commission about exposure to sub-prime mortgages. As a result, Citigroup was deemed an

ineligible issuer, and lost its WKSI status. 6 In connection with the settlement, Citigroup agreed

to comply with certain undertakings, all of which were already in place at the time of the

settlement, related to its policies, practices, and procedures concerning the disclosure of its

earnings and other information related to its financial performance in quarterly press releases,

including (i) maintaining a Disclosure Committee and a set of controls and procedures for that

committee; (ii) maintaining an Earnings Subcommittee of the Disclosure Committee; (iii)

requiring certain individuals to sign and date Statements of Accountability prior to release of

Citigroup's quarterly earnings information; and (iv) quarterly execution by the Disclosure

Committee of a certification regarding the effectiveness of Citigroup' s disclosure controls and

procedures. These practices and policies remain in place and Citigroup regained WKSI status in

late 2013 at the end ofthe three-year period specified in Securities Act Rule 405.

The conduct at issue in the Order predates the resolution of the majority of the matters

discussed above and there is no relationship between the Alpha program discussed in the Order

6

See Securities and Exchange Commission v. Citigroup Inc., 1:10-cv-01277 (D.D.C. Oct. 19, 2010).

ACTIVE 216070982v.l0

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January 17,2017

Page9

and any of the actions underlying the above-referenced waiver requests. The conduct that was

the subject of the above-referenced waiver requests and the conduct in this matter do not relate to

Citigroup's conduct as an issuer of securities and does not call into question Citigroup's ability

to make accurate and reliable disclosures. In addition, CGMI has discontinued the Alpha

program and taken steps that would have helped to prevent such conduct from recurring.

Impact on Issuer if Request is Denied

F

The Division's Revised Statement indicates that it will "assess whether the loss ofWKSI

status would be a disproportionate hardship in light of the nature of the issuer's conduct." 7

Given that the conduct described in the Order did not involve Citi (the issuer), was of a limited

duration, occurred over five years ago, and has since been discontinued, and taking into account

the monetary fines imposed on CGMI and the remedial measures described above, we

respectfully submit that the impact of Citi being designated an ineligible issuer would be unduly

disproportionate and severe.

Citigroup is a global financial institution that relies on automatic shelf registration

statements (the "WKSI shelf') (and automatic post-effective amendments thereto, as necessary)

to conduct its day-to-day business transactions, including frequent offers and sales registered

under the WKSI shelf. The loss ofCiti's status as an eligible issuer could, as described in more

detail below, have an impact on Citi's ability to continue to raise capital and conduct its

operations, particularly in light of ongoing regulatory changes impacting Citigroup. In addition,

many Citi institutional and retail clients seek to purchase investment products that are structured

to meet the specific investment goals of those clients. These structured products are securities

that are often sold in offerings registered with the SEC using Citi's WKSI shelf, as described

further below. Consequently, the ability to avail itself of automatic shelf registration and the

other benefits available to a WKSI, including the use of free writing prospectuses, is extremely

important to Citi's ability to conduct its operations and operate client-facing businesses.

As an ineligible issuer, Citi would, among other things, lose the ability to:

7

•

file automatic shelf registration statements to register an indeterminate amount of

securities;

•

offer additional securities of the classes covered by a registration statement without

filing a new registration statement;

See Revised Statement.

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Timothy Henseler, Esq.

January 17, 2017

Page 10

•

use free writing prospectuses other than one that contains only a description of the

terms of the offered securities or the offering itself;

•

allow Citi to include certain information omitted from the registration statement at

the time of effectiveness through the filing of prospectus supplements or

incorporated Exchange Act reports;

•

take advantage of the "pay as you go" filing fee payment process; and

•

qualify a new indenture under the Trust Indenture Act of 1939, if needed, without

filing or having the Commission declare effective a new registration statement.

Citi currently has on file a WKSI shelf on Form S-3 that registers indeterminate amounts

of multiple classes of securities. Since November 2013, Citigroup has issued a variety of

securities that are registered under the WKSI shelf, including unsecured senior or subordinated

debt securities and preferred stock and related depositary shares, and has the ability to issue its

common stock, common stock warrants, index warrants, stock purc~ase contracts, and stock

purchase units off the WKSI shelf. Since regaining its WKSI status in November 2013,

Citigroup has issued off the WKSI shelf approximately $12.5 billion in principal amount of

regulatory capital securities (in the form of preferred stock represented by depositary shares),

approximately 4 7% of the principal amount of all regulatory capital securities issued by

Citigroup in that period. In that same period, the value of all securities issued by Citigroup off

the WKSI shelf was approximately $89.5 billion in approximately 850 offerings. Furthermore,

approximately 73% of total aggregate principal amount of all Citigroup securities (including

benchmark and structured products), with appropriate FX applied for non-US issuances, were

issued offthe WKSI shelf. These figures demonstrate the importance of the WKSI shelf to

Citigroup in meeting its capital, funding and business requirements.

In connection with those approximately 850 public offerings, approximately 383 free

writing prospectuses ("FWPs") were utilized, approximately 80% for offerings of structured

notes under a medium-term note ("MTN") program. Approximately 43% of these MTN FWPs

consisted of marketing materials that could not be used for investors' benefit by an ineligible

issuer without modification. When Citigroup was subject to a WKSI disqualification it was not

able to utilize such FWPs and therefore its marketing efforts were substantially impaired.

Moreover, many of these MTN offerings are distributed through third-party distributors. These

distributors often produce their own MTN FWPs and may object to being limited to only those

FWPs available to ineligible issuers. This limitation may cause third-party distributors to no

longer offer Citigroup MTNs to their clients and may result in a loss of business opportunity for

Citigroup.

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January 17, 2017

Page 11

Further, as an ineligible issuer, Citi would lose significant flexibility, most importantly

the ability to register additional types of securities, or to register additional entities as issuers, not

currently covered by the WKSI shelf by filing a new registration statement or post-effective

amendment that becomes immediately effective. The adverse market and issuer impact of the

potential loss of flexibility with respect to new types of securities or .adding new entities as

issuers is particularly important to Citi in light of regulatory and market conditions and

uncertainties that continue to significantly transform the landscape for financial institutions like

Citi.

As one example, in December 2016, the Board of Governors ofthe Federal Reserve (the

"Federal Reserve") issued a final rule on "total loss-absorbing capacity" ("TLAC") and eligible

external long-term debt ("LTD"), which requires institutions such as Citigroup to maintain

minimum levels of each. The final rules disqualify from eligible external LTD any debt

securities that permit acceleration for reasons other than insolvency ~f the issuer or non-payment

of principal or interest that continues for 30 days, as well as securities not governed by U.S. law.

Debt that is issued prior to December 31, 2016 that includes otherwise impermissible

acceleration provisions or are governed by non-U.S. law is grandfathered by the final rules, and

can count towards an institution's minimum eligible external LTD requirements. Additionally,

pursuant to the final rules' "clean holding company" requirements, no short-term debt is

permitted to be issued by the parent bank holding company (Citigroup) and there is a limitation

on the amount of third-party debt at the parent holding company level that is not TLAC eligible.

The final rules become effective on January 1, 2019.

·

Additionally, the Federal Reserve's proposed rules on TLAC and LTD issued in October

2015 included a provision that would prohibit U.S. bank holding companies that are GSIBs from

' issuing short term notes and other types of structured products, which is also consistent with

feedback Citigroup and other peer institutions have received as part of the Federal Reserve and

FDIC's guidance pursuant to required resolution planning. As a result, in March 2016, CGMHI

was added as an issuer of such products through a post-effective amendment to the WKSI shelf,

which became immediately effective upon filing as a result of Citigroup's WKSI status. Thus,

no disruption to the ability to issue structured products occurred, which could not have been

achieved if Citi had been an ineligible issuer. While the final TLAC rules provide for

grandfathering of existing, outstanding LTD debt as of December 31, 2016, uncertainty still

currently exists as to the amount of Citigroup's debt securities that will benefit from the

grandfathering provision. As a result, at the time of this letter it is difficult to quantify the

amount ofCitigroup's outstanding external eligible LTD and measure it against the minimum

requirement applicable to Citigroup. Accordingly, Citigroup will be required to issue additional

amounts of debt in a limited amount of time. IfCiti became an ineligible issuer, it would need to

register a definite amount of securities under its shelf registration statement, which illustrates

another reason the flexibility afforded by a WKSI shelf is important to Citi.

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Timothy Henseler, Esq.

January 17, 2017

Page 12

In addition, under the annual stress tests administered by the Federal Reserve, the

parameters and requirements of which change annually, significant capital buffers, above the

regulatory minimum levels, are required for financial institutions to be able to withstand a severe

economic downturn hypothesized by the Federal Reserve for purposes of the stress tests. The

Federal Reserve has recently indicated that a risk-based capital surcharge upon U.S. bank

holding companies that are identified as global systemically important bank holding companies

("GSIB"), including Citigroup, would likely be included in the annual stress tests. While the

Federal Reserve has indicated that the GSIB surcharge may not be added on a "dollar-for-dollar"

basis, inclusion ofCitigroup's GSIB surcharge (currently 3.5%) would substantially increase the

amount of capital Citigroup must hold in order to pass the annual stress tests and thus be able to

return capital to its shareholders. As such, there continues to be significant uncertainty as to how

much capital Citigroup will need to hold in order to meet Federal Reserve expectations, and the

time period in which Citigroup will have to raise such capital.

Further, although qualifying regulatory capital currently generally consists of common

equity, preferred equity and certain subordinated debt, given all ofthe changes to Citigroup's

capital, liquidity and similar requirements, it is possible that capital raising efforts going forward

will involve the issuance of new types of securities. The ongoing uncertainty regarding

Citigroup's regulatory requirements and potential capital needs, such as the GSIB surcharge

described above, could impose additional needs on Citi to access the capital markets, including

through the use of securities with characteristics that are not yet known and therefore are difficult

to anticipate in a shelf registration statement. "File and launch" for the public offering of new

securities has developed as the market standard for large issuers since the advent of the

Commission's securities offering reform in 2005. As an ineligible issuer, by the time Citi may

be able to enter the market (i.e., after it files an amendment to its non-WKSI shelf registration

statement subject to staff review and approval), the market could be saturated, there may not be

the same level of demand or pricing terms may have become disadvantageous.

Finally, as the SEC and staff are aware, under the Dodd-Frank Wall Street Reform and

Consumer Protection Act, the Federal Reserve has imposed, and has the authority to impose

further, prudential standards on financial institutions. These standards include rules relating to

heightened capital, leverage and liquidity standards. This authority includes the potential to

impose "counter-cyclical" capital buffers at any time based "on a range of macroeconomic,

financial, and supervisory information indicating an increase in systemic risk," which if imposed,

would increase Citi's capital needs.

*

*

*

In sum, Citi respectfully submits that, based on the factors set forth in the Revised

Statement, the loss to Citi of certainty and flexibility if it were to become an ineligible issuer

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January 17, 2017

Page 13

would be a severe and disproportionate hardship to Citi in light of the nature ofthe conduct

which is the subject of the Order. The violations described in the Order (i) did not involve Citi,

but rather its subsidiary CGMI, (ii) are not criminal in nature and do not involve scienter-based

fraud, (iii) involved a program which was discontinued by CGMI in December 2011, and (iv)

perhaps more importantly, in no way relate to Citi's ability to produce reliable disclosures,

including in its role as an issuer of securities. Accordingly, granting.a waiver in this instance is

consistent with the factors identified in the Revised Statement, the public interest and the

protection of investors, and we respectfully request that the Commission and/or the Division

make that determination.

Please do not hesitate to contact me at (617) 223-0362 should you have any questions

regarding this request.

Very truly yours,

if~~

Elizabeth A. Marino

cc:

Joshua E. Levine Esq.

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