Hong Kong’s Securities and Futures Commission (SFC) has reprimanded Citigroup Global Markets Asia Limited and slapped a fine of HK$348.25 million (around $44.68 million) for some serious regulatory failures.
According to the regulator, the company allowed various trading desks under its Cash Equities business to spread mislabeled Indications of Interest (IOIs). Additionally, they misrepresented institutional clients while executing facilitation trades between 2008 and 2018.
Out of 174 sample facilitation trades executed by the Asian subsidiary of Citi and reviewed by the Hong Kong regulator, 127 provided either incorrect information to the clients, made misleading statements or did not even take client consent before order routing.
The regulator highlighted that this is pervasive dishonest behavior by the company and could be easily avoided if there were internal controls and compliances in place.
“The severity of CGMAL’s failures exposed a culture that encouraged chasing revenue at the expense of basic standards of honesty,” Ashley Alder, the SFC’s Chief Executive Officer, said.
“As a result, in the face of unrelenting commercial pressure to solicit more business and increase CGMAL’s market share, deceptive practices were deployed at the expense of clients’ best interest and to the detriment of market integrity.”
Management Is Accountable
Furthermore, the regulator is evaluating the failures and lapses in parts of the senior management of the company and is considering discharging them from their supervisory duties. Moreover, it will commence disciplinary action against these Citi management officials.
“A key concern of the SFC is the failure of CGMAL’s senior management to ensure the maintenance of appropriate standards of conduct and adherence to relevant regulatory requirements, and to understand manage and monitor its business and risks,” said Thomas Atkinson, the Executive Director of Enforcement at SFC.
“The prevalence of the misconduct for a prolonged period reflects a failure on the part of CGMAL’s senior management to properly discharge their management and supervisory responsibilities.”
