Citigroup Alternative Investments Llc

Allegations: THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM ("FED") IDENTIFIED SIGNIFICANT ONGOING DEFICIENCIES IN IMPLEMENTATION AND EXECUTION BY CITIGROUP WITH RESPECT TO VARIOUS AREAS OF RISK MANAGEMENT AND INTERNAL CONTROLS, INCLUDING FOR DATA QUALITY MANAGEMENT AND REGULATORY REPORTING, COMPLIANCE RISK MANAGEMENT, CAPITAL PLANNING, AND LIQUIDITY RISK MANAGEMENT. Status: Final Sanction Detail: CITIGROUP AGREED TO CEASE AND DESIST AND AGREE TO CERTAIN AFFIRMATIVE ACTIONS/UNDERTAKINGS Summary: CITIGROUP AGREED TO TAKE CERTAIN AFFIRMATIVE ACTIONS/UNDERTAKINGS RELATED TO SOURCE OF STRENGTH, BOARD OVERSIGHT, RISK MANAGEMENT AND INTERNAL CONTROLS, DATA QUALITY MANAGEMENT, COMPLIANCE RISK MANAGEMENT, PROGRESS REPORTS, APPROVAL AND IMPLEMENTATION AND DESIGNATION OF PRIMARY CONTACT.

Allegations: ON MAY 20, 2015, CITIGROUP INC. ("CITIGROUP") CONSENTED TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST AND ORDER OF ASSESSMENT OF A CIVIL MONEY PENALTY (THE "ORDER") BY THE U.S. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM ("FRB"). CITIGROUP AGREED TO PAY A PENALTY OF $342 MILLION AND TO FURTHER ENHANCE THE CONTROL FRAMEWORK GOVERNING CITIGROUP'S FOREIGN EXCHANGE ("FX") TRADING AND RELATED SALES ACTIVITIES AND CERTAIN OTHER COMMODITIES AND INTEREST RATE MARKET ACTIVITIES. THE ORDER ALLEGES THAT CITIGROUP LACKED ADEQUATE FIRM-WIDE GOVERNANCE, RISK MANAGEMENT, COMPLIANCE AND AUDIT POLICIES AND PROCEDURES RELATING TO ITS FX ACTIVITIES. THE ORDER FURTHER ALLEGES THAT CITIGROUP'S DEFICIENT POLICIES AND PROCEDURES PREVENTED IT FROM DETECTING AND ADDRESSING UNSAFE AND UNSOUND CONDUCT BY ITS FX TRADERS, INCLUDING AGREEMENTS WITH EXTERNAL TRADERS TO COORDINATE TRADING IN A MANNER DESIGNED TO INFLUENCE CERTAIN FX BENCHMARK FIXES AND MARKET PRICES AND TRADING STRATEGIES THAT RAISED POTENTIAL CONFLICTS OF INTEREST. Status: Final Sanction Detail: CIVIL MONEY PENALTY OF $342 MILLION LEVIED AGAINST CONTROL AFFILIATE (CITIGROUP INC.). NO LEVY AGAINST APPLICANT. PENALTY PAID BY CONTROL AFFILIATE ON MAY 20, 2015. Summary: ON MAY 20, 2015, CITIGROUP CONSENTED TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST AND ORDER OF ASSESSMENT OF A CIVIL MONEY PENALTY BY THE FRB. THE ORDER REQUIRES CITIGROUP TO PAY A CIVIL MONEY PENALTY OF $342 MILLION AND TO TAKE SPECIFIC STEPS TO IMPROVE ITS OVERSIGHT, INTERNAL CONTROLS, COMPLIANCE, RISK MANAGEMENT AND AUDIT PROGRAMS, INCLUDING TO SUBMIT WITHIN 90 DAYS OF THE ORDER, WRITTEN PLANS AND PROGRAMS RELATING TO REMEDIATION.

Allegations: THE DOJ AND STATE AGS ALLEGED THAT CITI MISREPRESENTED THE QUALITY AND CHARACTERISTICS OF THE MORTGAGE LOANS IT SECURITIZED AND SOLD TO INVESTORS, INCLUDING THAT THE LOANS WERE ORIGINATED IN ACCORDANCE WITH UNDERWRITING GUIDELINES AND IN COMPLIANCE WITH FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS. THE FDIC HAD ASSERTED, IN SEVERAL LITIGATIONS COMMENCED AGAINST CITIGROUP AS ISSUER AND UNDERWRITER OF RMBS, SIMILAR CLAIMS OF MISREPRESENTATIONS RELATING TO THE QUALITY OF THE LOAN COLLATERAL IN THE RMBS AT ISSUE. Status: Final Sanction Detail: UNDER THE TERMS OF THE SETTLEMENT, CITIGROUP WILL PAY A TOTAL OF $4.5 BILLION IN CASH AND PROVIDE $2.5 BILLION IN CONSUMER RELIEF. THE CASH PORTION OF THE SETTLEMENT CONSISTS OF A $4 BILLION CIVIL MONETARY PENALTY PAYMENT TO THE DOJ PURSUANT TO THE FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT OF 1989 ("FIRREA"), $208,250,000 TO THE FDIC AND $291,750,000 TO VARIOUS STATE AGS. Summary: ON JULY 11, 2014, CITIGROUP ENTERED INTO A SETTLEMENT WITH THE UNITED STATES DEPARTMENT OF JUSTICE (THE "DOJ"), SEVERAL STATE ATTORNEYS GENERAL (THE "STATE AGS") AND THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE "FDIC") RELATING TO RESIDENTIAL MORTGAGE-BACKED SECURITIES ("RMBS") AND COLLATERALIZED DEBT OBLIGATIONS ("CDOS") ISSUED, STRUCTURED OR UNDERWRITTEN BY CITI BETWEEN 2003 AND 2008. UNDER THE TERMS OF THE SETTLEMENT, CITIGROUP WILL PAY A TOTAL OF $4.5 BILLION IN CASH AND PROVIDE $2.5 BILLION IN CONSUMER RELIEF. THE CASH PORTION OF THE SETTLEMENT CONSISTS OF A $4 BILLION CIVIL MONETARY PENALTY PAYMENT TO THE DOJ PURSUANT TO THE FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT OF 1989 ("FIRREA"), $208,250,000 TO THE FDIC AND $291,750,000 TO VARIOUS STATE AGS. THE SETTLEMENT RELEASES CIVIL CLAIMS THAT COULD HAVE BEEN ASSERTED UNDER COMMON LAW, FIRREA, THE FALSE CLAIMS ACT, THE PROGRAM FRAUD CIVIL REMEDIES ACT, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, THE INJUNCTIONS AGAINST FRAUD ACT, AND VARIOUS STATE STATUTES, INCLUDING STATE SECURITIES LAWS.

Allegations: ALLEGED VIOLATIONS OF SECTIONS 17(A)(2) AND 17(A)(3) OF THE SECURITIES ACT AGAINST CITIGROUP GLOBAL MARKETS INC. (CGMI) AND CITIGROUP ALTERNATIVE INVESTMENTS LLC (CAI), SECTION 206(2) AGAINST CGMI, AND SECTIONS 206(4) OF THE ADVISERS ACT, RULE 206(4)-7 PROMULGATED THEREUNDER, AND RULE 206(4)-8 PROMULGATED THEREUNDER AGAINST CAI IN THAT THE FIRMS' FINANCIAL ADVISERS AND THE FUND MANAGER MISREPRESENTED TWO ALTERNATIVE INVESTMENT PRODUCTS' RISKS AND PERFORMANCE TO CLIENTS FROM 2002 THROUGH 2008. Status: Final Sanction Detail: CEASE AND DESIST, CENSURE, DISGORGEMENT OF $139,950,239 AND PREJUDGMENT INTEREST OF $39,612,089 Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRMS CONSENTED TO AN ORDER TO CEASE AND DESIST, A CENSURE, DISGORGEMENT OF $139,950,239 AND PREJUDGMENT INTEREST OF $39,612,089.