Haldanes successfully defended Citigroup traders in SFC investigation
Haldanes successfully defended a team of equity traders and dealing team officers in a recent Securities and Futures Commission (SFC) investigation, whereby the markets watchdog reprimanded and fined Citigroup Global Markets Asia Limited (Citigroup) HK$348.25 million (US$45 million) for its facilitation trading practices over a period of 10 years.
SFC’s findings
The SFC found that some of Citigroup’s trading desks had issued inaccurate “Indications of Interest” (IOIs) in stocks to generate customer inquiries, and had also made misrepresentations to institutional clients when executing facilitation trades. The SFC also discovered “serious lapses and deficiencies in internal controls, compliance function and management oversight” of Citigroup throughout the 3-year investigation.
Upon considering various documentary and verbal evidence, the SFC concluded that “the main root cause for the desks’ misconduct was the commercial pressure faced by traders to solicit more business from clients and increase Citigroup’s market share, which was a heavy directive from Citigroup’s senior management”. In addition, it was found that “Citigroup did not provide any training or guidance to traders on the categorization of IOIs or how traders should communicate with clients when they responded to Citigroup’s IOIs”.
In the circumstances, the SFC is of the opinion that Citigroup has breached the SFC Code of Conduct and various SFC Guidelines and Circulars, and is guilty of misconduct under section 194 of the Securities and Futures Ordinance (Cap 571).
Significance of Citigroup’s case
This is one of the heftiest fines imposed by the SFC in its enforcement history concerning serious regulatory breaches and internal control failures on facilitation trading.
Haldanes represented a team of Citigroup equity traders and dealing team officers in this case and successfully cleared their names. The lead partner of this case is Felix Ng.
UBS Case in 2019
Earlier in 2019, Felix Ng also successfully defended a team of UBS AG (UBS) bond traders in a SFC investigation and cleared their names. The SFC reprimanded and fined UBS HK$400million for overcharging its clients over a ten-year period and for serious systemic internal control failures relating to bond trades.
SFC Press Releases
- For details of the Citigroup case, please visit here for the SFC’s Enforcement News
- The SFC’s Statement of Disciplinary Action against Citigroup can be downloaded here.
- For details of the 2019 UBS case, please click here for the SFC’s Enforcement News
News articles on Citigroup SFC case
- Reuters: https://www.reuters.com/business/finance/hong-kong-regulator-fines-citi-unit-45-million-2022-01-28/
- Wall Street Journal: https://www.wsj.com/articles/citigroup-fined-for-misconduct-in-asian-stock-trading-11643370046
For further enquiries about our Securities, Regulatory & Disciplinary practice, please visit: https://www.haldanes.com/practice-areas/securities-regulatory-disciplinary-matters/
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