The Financial Conduct Authority (FCA) has fined Citigroup Global Markets £12.6m for failing to implement measures to spot potential market abuse.
The UK regulator said that since Citigroup failed to properly implement Market Abuse Regulation (MAR) requirements, it could not effectively monitor trading activities to prevent certain types of insider dealing and market manipulation.
Banks have been required to follow MAR rules since 2016, which require them to work to detect and report market abuse, including through monitoring both orders and trades.
However, Citigroup failed to properly implement the new requirements, and 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 FCA said there “many significant trade surveillance gaps” in areas like equities, interest rates and commodities trades.
It noted, “Citigroup’s flawed implementation resulted in significant gaps in its arrangements, systems, and procedures for additional trade surveillance.”
Citigroup agreed to resolve the case and qualified for a 30% discount on the fine, meaning the bank would have had to pay £17.9 million otherwise.
During the period covered by the FCA’s enforcement action, Citigroup earned about £2.6 billion in revenue from arranging or executing trades on markets.
“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,” Mark Steward, the FCA’s executive director for enforcement, said in a statement.
“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.”
The penalty comes after US based Citigroup, home to one of the world’s biggest investment banks, faced pressure from regulators in the US and the UK to improve its controls.
The Bank of England charged the bank with a record £44 million fine in 2019 for years of inaccurate reporting about its capital and liquidity levels, while in the US, the Federal Reserve and the Office of the Comptroller of the Currency handed out a $400 million fine in 2020 for persistent problems with risk management.
Oliver Blower, ex-Barclays and Bank of America Merrill Lynch, and now CEO of fintech firm VoxSmart says, “A failure to enforce the MAR trade surveillance requirements is clearly a massive oversight, but this does not mean that the wider industry has not enforced stringent measures to combat market abuse.”
He adds, “The Citi fine reinforces why surveillance needs to be looked at on an individual conduct risk assessment basis – which means that very few areas of a large financial institution, if any, that are out of bounds.
Working towards a smarter way to monitor trade, markets, and comms data in one single location so that there is more visibility into all activity cross-desk and cross-department, must be the way forward.”
