Citigroup’s international broker-dealer was fined 12.6 million pounds (U.S. $14.9 million) by the U.K.’s Financial Conduct Authority (FCA) for failing to implement an adequate trade surveillance program required by British law.
The FCA announced Friday that Citigroup Global Markets, a London-based subsidiary of Citigroup, failed to “properly implement the Market Abuse Regulation (MAR) trade surveillance requirements relating to the detection of market abuse,” which include insider trading and market manipulation.
Citigroup Global Markets failed to comply with the regulation when it took effect in 2016, and the FCA said the broker-dealer took 18 months to “identify and assess the specific market abuse risks its business may have been exposed to and which it needed to detect.”
The MAR requires monitoring of both orders and trades. The broker-dealer’s alleged deficiencies “resulted in significant gaps in its arrangements, systems, and procedures for additional trade surveillance,” the FCA said.
“The framework for market integrity depends on the partnership between the FCA and market participants using data to detect suspicious trading,” said Mark Steward, the FCA’s executive director of enforcement and market oversight, in a press release. “By not fully implementing the new provisions when required, Citigroup Global Markets did not carry its full weight in this partnership, impacting market integrity and the overall detection of market abuse.”
Compliance considerations: Citigroup Global Markets did not begin its risk assessment for compliance with the MAR until December 2017, even though the law was enacted a year before, according to the FCA’s final order. Once underway, the broker-dealer’s assessment did not consider and account for secondary legislation that supported the MAR and did not provide “the means to prioritize the most serious market abuse risks affecting its business,” the order said.
In addition, a MAR working group at Citigroup Global Markets failed to provide sufficient oversight to the implementation of its trade surveillance program; failed to define the scope of the MAR implementation objective; and “wrongly informed” the broker-dealer’s U.K. risk, compliance, and controls committee MAR implementation was complete.
Citigroup Global Markets failed to “conduct its business with due skill, care, and diligence in relation to its implementation” of the MAR, the order said.
The firm did not identify deficiencies in its compliance until January 2018 and then commenced a remediation program that addressed the most significant gaps by the end of that year, the FCA said.
Citigroup did not respond to a request for comment.
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