Eight traders from Citigroup’s Hong Kong trading desk have been fired, and three others suspended, after an internal investigation found that they had misled clients.
The equity traders had taken the other side of client trades using the bank’s own balance sheet, making Citigroup a principal in the trades, when the clients had been told the bank was only acting as an agent, matching the clients’ orders with those of other clients, a person familiar with the situation said.
Citigroup released a statement saying that an internal review had “identified personal conduct that did not meet our standards and we have taken appropriate action. Instances where the capacity in which Citi was acting was not accurately represented were detected in relation to facilitation trading.”
The firing come in the wake of several investigations by the Hong Kong Securities and Futures Commission (SFC). Last week, the regulator fined a group of banks $100m for failing in their duties as sponsors of Chinese initial public offerings, and in the case of one of the banks, UBS, suspended its license to advise on corporate finance.
Last year the SFC fined Citigroup $7m for failure to perform adequate due diligence as the sole sponsor of the 2009 IPO of Real Gold Mining. The shares of the miner were later suspended because it had filed inconsistent accounts in Hong Kong and mainland China, and company funds had been transferred to a founder.
Also in 2018, the SFC fined Citibank $520,000 for allowing clients to trade within an “alternative liquidity pool” of “dark pool” trading operation when they had not been properly vetted and informed of the guidelines for trading in the pool. The regulator found that Citibank’s failures were deliberate or reckless.
The SFC had in previous years been criticised for its lack of action on behalf of shareholders.