Citibank failed to physically mark cancelled certificates with the term "CANCELLED." In some instances, Citibank's perforation marks went unnoticed, were not copied clearly in photocopying or facsimile transmission, or were even mistakenly interpreted as official notarization.

Moreover, a number of cancelled certificates that have been recovered do not show any perforations or other markings signifying cancellation. Citibank failed to implement any subsequent verification or other procedure to ensure that cancelled certificates were actually perforated to indicate cancellation, resulting in the resurfacing of a significant number of cancelled certificates lacking any indications of cancellation.

Citibank failed to implement any procedures to safeguard the certificates turned over to MSM or to verify any of MSM's functions, including whether the documents were actually destroyed. Moreover, during 1985 to 1987, while MSM was utilized to destroy the backlogged cancelled certificates, Citibank continued to destroy currently cancelled certificates in-house. In accordance with longstanding procedure, Citibank required that the destruction, by paper shredders, be under dual control. No similar precautions were instituted when MSM was retained to destroy the certificates.

2. Section 17 (f) (1) of the Exchange Act

and Rule 17f-1 thereunder

Section 17 (f) (1) and Rule 17f-1 require, in pertinent part, that every registered transfer agent report to the Commission or its designee, the SIC, among others, certain information about missing, lost, counterfeit, or stolen securities certificates on a Securities Report. With regard to stolen securities where there is substantial basis for believing that criminal activity was involved, a Securities Report must be filed within one business day of the discovery of the theft or loss and must promptly be reported to the FBI. With regard to missing or lost securities, a Securities Report must be filed one day after the discovery of the loss of any securities certificate where criminal actions is not suspected when the securities certificate have been missing or lost for a period of two days.

Citibank failed to file timely Securities Reports in 1987, 1989 and 1990 with regard to the resurfaced Shell, Virginia Railway and Georgia Pacific certificates, respectively. Thereafter, prior to the October 28, 1991 filing for all the securities issues sent to MSM, Citibank failed to file timely Securities Reports upon learning of the presentment or appearance of a particular cancelled certificate.

IV.
FINDINGS

Based on the above, the Commission finds that Citibank violated Sections 17A and 17 (f) (1) of the Exchange Act and Rules 17Ad-12 and 17f-1 promulgated thereunder.

V.

ORDER

Accordingly, IT IS HEREBY ORDERED that Citibank permanently cease and desist from committing or causing any violation, and committing or causing any future violation, of Sections 17A and 17(f) (1) of the Exchange Act and Rules 17Ad-12 and 17f-1 promulgated thereunder.

By the Commission.

Jonathan G. Katz
Secretary

This is to acknowledge receipt of your letter of April 4, 1994 and enclosures, with further reference to your testimony before the Subcommittee on March 2, 1994 and in specific response to the Subcommittee's letter of March 11, 1994.

On

Your transmittal letter noted that the chronology and supporting documentation included information that was nonpublic and sensitive, and requested confidential treatment thereof. April 8, 1994, in keeping with Subcommittee practice in such matters, Subcommittee counsels met with your agency's General Counsel, Director of the Division of Enforcement, and other appropriate senior Commission staff to review the documents and the bases for your confidential treatment request.

This is to inform you that, notwithstanding the concerns that you raised, the Subcommittee has determined to include these materials in the public hearing record. You testified about the subject "SEC and OCC enforcement actions against Citibank" on the record under oath in a public hearing before the Subcommittee. The records or information relate to closed enforcement proceedings and would appear for the most part to be obtainable under 5 U.S.c. § 552 (the Freedom of Information Act). Finally, the documents present a clear and concrete case study on the issue of coordination and cooperation by securities and banking regulators with respect to their examination and enforcement programs. Recent and pending actions by the bank regulators highlight the problem of overlapping and potentially inconsistent regulation. The effective and efficient administration and enforcement of the federal securities laws, and continued public confidence in that system of regulation, were key issues in the Subcommittee's hearing and the driving force behind repeated calls for the adoption of functional regulation.

The Honorable Arthur Levitt

Page 2

Thank you for your cooperation and assistance with the work of the Subcommittee.

Sincerely,

John D. Dingell
Chairman

Subcommittee on Oversight
and Investigations

CC: The Honorable Dan Schaefer

Congress of the United States
House of Representatives

Washington, DC 20515

December 20, 1993

The Honorable Eugene A. Ludwig

Comptroller of the Currency 250 E Street, S. W. Washington, D. C. 20219

Dear Comptroller Ludwig:

Pursuant to Rules X and XI of the Rules of the U.S. House of Representatives, and our continuing oversight, respectively, of banks and banking, including deposit insurance, and of securities and exchanges, we are writing with regard to the proposed acquisition of The Dreyfus Corporation (Dreyfus) by Mellon Bank Corporation (Mellon Corp). This proposed transaction raises numerous policy and legal concerns. We understand that no formal notification of the proposed acquisition has been received by your office, but in light of the parties' publicly stated intentions to so proceed, we ask that you address our concerns, as set forth below, before acting on any notification. We understand that many of the issues raised by the proposed transactions have been separately addressed by the OCC and the Federal Reserve Board in various regulations, orders, letters, and interpretative releases. However, the size and the complexity of the proposed transaction and the extensive marketing and advertising of the Dreyfus funds to the public warrant Congressional scrutiny. Thus, we request that you respond to the concerns raised in this letter.

First, we understand that Mellon Corp. currently intends to operate Dreyfus as a subsidiary of its lead bank, Mellon Bank, N.A. (Mellon Bank or Mellon). We are concerned about the implications of this proposed structure for the safety and soundness of Mellon Bank, an FDIC insured institution. We note that in every financial services reform package considered by either the Committee on Banking or the Committee on Energy and Commerce most securities activities, including investment company related activities, were required to be conducted in a separately capitalized subsidiary of the bank holding company, in order to protect the safety and soundness of the bank and the Federal deposit insurance funds and for the protection of investors.