Citigroup Global Markets has been fined £12,553,800 by the UK’s Financial Conduct Authority (FCA) for its inability to properly implement the Market Abuse Regulation (MAR) trade surveillance requirements relating to the detection of market abuse.
As a result of not implementing the MAR trade surveillance requirements properly, Citigroup Global Markets was not able to monitor its trading activities for specific types of insider dealing and market manipulation effectively, the regulator said.
Originally introduced in 2016, the MAR introduced a new requirement to monitor orders as well as trades, to spot potential and attempted market abuse across a wide scope of markets and financial instruments.
“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 FCA found that when the new requirement took effect, Citigroup Global Markets failed to properly implement it and took 18 months to pinpoint and assess the specific market abuse risks its business may have been prone to and needed to detect.
The firm’s flawed implementation led to significant gaps in its arrangements, systems, and procedures for additional trade surveillance, according to the FCA.
“The framework for market integrity depends on the partnership between the FCA and market participants using data to detect suspicious trading,” said Mark Steward, executive director of enforcement and market oversight.
“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 has agreed to resolve this case, qualifying for a 30% discount – which without, the fine would have been £17,934,030.
“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,” said Oliver Blower, ex-Barclays and Bank of America Merrill Lynch, now CEO of fintech firm VoxSmart.
“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.”