UK’s FCA Fines Citigroup’s International Broker-Dealer £12.6M for Failures Relating to Detection of Market Abuse

The UK’s Financial Conduct Authority (FCA) has fined Citigroup Global Markets Limited £12,553,800 “for failing to properly implement the Market Abuse Regulation (MAR) trade surveillance requirements relating to the detection of market abuse.”

By failing to properly implement the MAR trade surveillance requirements, Citigroup Global Markets could “not effectively monitor its trading activities for certain types of insider dealing and market manipulation.”

MAR was “introduced in 2016 and expanded requirements to detect and report potential market abuse.” It introduced a requirement “to monitor both orders and trades to detect potential and attempted market abuse across a broad range of markets and financial instruments.”

However, the FCA found that Citigroup Global Markets “failed to properly implement the new requirement when it took effect, 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.”

Citigroup Global Markets’ flawed implementation “resulted in significant gaps in its arrangements, systems, and procedures for additional trade surveillance.”

Mark Steward, Executive Director of Enforcement and Market Oversight, commented:

‘The framework for market integrity depends on the partnership between the FCA and market participants using data to detect suspicious trading. 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.’

Citigroup Global Markets “agreed to resolve this case and qualified for a 30% discount. Without this discount, the fine would have been £17,934,030.”

As clarified in the update, the FCA “conducts its own surveillance for market abuse by consolidating data obtained from market participants to detect potential insider dealing and market manipulation.”

The FCA’s Market Surveillance team “conducts specialist supervision of the suspicious transaction and order reporting (STOR) regime.”

As part of its extensive supervisory program, it “undertakes regular and ad hoc visits to a wide range of market participants to assess their market abuse surveillance arrangements.”

Citigroup Global Markets is “headquartered in London and is a wholly-owned indirect subsidiary of Citigroup Inc, a US-based international bank.”

MAR is “a significant piece of legislation that covers the offences of insider dealing, unlawful disclosure of inside information, and market manipulation.”

Firms that arrange or execute transactions in financial instruments are “required by Article 16(2) of MAR to establish and maintain effective arrangements, systems, and procedures to detect and report potential market abuse.”

These failings “meant that Citigroup Global Markets breached Article 16(2) of MAR and Principle 2 of the FCA’s Principles for Businesses – that a firm must conduct its business with due skill, care and diligence.”

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