The Texas Attorney General's office will decide by Jan. 13 whether Citigroup "discriminates" against the firearms industry, a ruling that will determine the bank's ability to underwrite most municipal bond offerings in the state.
The New York-based bank has been under review by Attorney General Ken Paxton's office because of a Republican-backed state law that aims to punish financial firms for instituting anti-gun policies. In a Dec. 13 letter viewed by Bloomberg, Leslie Brock, assistant attorney general, said in order to "minimize disruption to the municipal public securities market," the office would make its determination and "promptly" announce its decision.
Governments in Texas that have chosen to work with Citigroup during the review have been required to ask the bank for additional assurance that they do not run afoul of the law. The bank has been stating for over a year that it can comply with the legislation and has managed about $3.5 billion of bond sales in Texas in 2022.
Still, at least one city
If Citigroup is found to have a policy that the office deems as restrictive to the firearms industry under the law, "we will not approve any public security issued on or after that date in which Citigroup purchases or underwrites the public security, or in which Citigroup is otherwise a party to a covered contract relating to the public security, regardless of whether the contract was entered into before such public announcement," Brock, who is also chief of the AG office's public finance division, said in the letter.
The letter also said that if they determine Citigroup is not a "discriminating company," that additional verification would no longer be required.
Mark Costiglio, a Citigroup spokesperson, declined to comment on the letter.
Texas laws
Paxton's office has unusual influence over the municipal bond market in Texas as his staff has to approve most state and local government debt transactions before they're able to close.
The firearms measure was one of a pair of laws that took effect in September 2021, limiting Texas governments' work with companies unless the firms verify that they don't "discriminate" against gun entities or boycott the fossil fuels industry.
Citigroup initially suspended muni underwriting in the state for a few months after September 2021 as it worked to verify compliance.
The National Shooting Sports Foundation, a trade group based in Newtown, Connecticut, has been behind the push for states to enact the firearms legislation, contending that companies in the industry are being denied services by banks. They have been questioning Citigroup's verifications with Paxton's office.
Mark Oliva, a spokesperson for the group, said the company is "pleased" that Paxton is reviewing Citi's stance.
"Citigroup's policy extends well beyond federal law to force their own vision of gun control by nameless and faceless corporate executives who are unaccountable to the American voter," he said in an emailed statement on Wednesday. "Citigroup's discriminatory policies are in clear violation with the Texas Firearm Industry Nondiscrimination Act."
In 2018, Citigroup announced policies that set restrictions on the firearms industry after a mass shooting at a high school in Parkland, Florida. Citigroup said it would prohibit retailers that are customers of the bank from offering bump stocks — devices that let semiautomatic rifles fire even more rapidly — or selling guns to people who haven't passed a background check or are younger than 21. The bank's policy does include exemptions, including one to the under-21 age restriction if a person has military training.
— With assistance from Mark Tannenbaum.
