Release Date: 19th August 2022

To access the original FCA document, click here.

Summary

Citigroup Global Markets Limited (CGML) was fined £12,553,800 by the Financial Conduct Authority (FCA) on 19 August 2022 for breaches of Principle 2 of the Authority’s Principles for Businesses and Article 16(2) of the Market Abuse Regulation (MAR). The fine, reduced from £17,934,030 due to a 30% early settlement discount, was imposed because CGML failed to implement effective systems to detect and report potential market abuse.

Key Takeaways for Other Firms:

• Effective Implementation of Regulations:
  • Ensure thorough understanding and implementation of all regulatory requirements, including secondary legislation.
  • Conduct timely and comprehensive gap analyses to identify and address compliance deficiencies.
• Due Skill, Care, and Diligence:
  • Regularly update and track compliance plans to ensure regulatory objectives are met.
  • Maintain robust oversight and monitoring mechanisms for compliance-related projects.
• Risk Assessment and Surveillance:
  • Conduct regular risk assessments to identify significant gaps in trade surveillance systems.
  • Implement necessary remediation programmes promptly to address identified risks.

Summary of Findings:

• Flawed Implementation of MAR Requirements:
  • CGML did not initially consider the secondary legislation supplementing MAR, leading to an incomplete implementation.
  • The initial MAR gap analysis was delayed until October 2017, hindering the prioritisation of market abuse risks.
  • CGML began preparing an Article 16(2) risk assessment only in December 2017, far behind schedule.
• Inadequate Tracking and Oversight:
  • The MAR Working Group failed to provide sufficient oversight, and the 2016 EMEA Compliance Plan did not define the scope of the MAR implementation objective.
  • CGML’s UK Business Risk, Compliance, and Controls committee and the CGML Board were misinformed in late 2016 that MAR implementation was complete.
  • EMEA Compliance did not adequately evaluate and monitor work related to Article 16(2) implementation as part of a global markets remediation programme.
• Failure to Identify and Address Significant Gaps:
  • CGML failed to identify major gaps in trade surveillance systems until January 2018, long after MAR took effect.
  • A risk assessment conducted in December 2017 and January 2018 revealed substantial gaps in CGML’s trade surveillance coverage.
  • CGML initiated a remediation programme in January 2018, addressing the most significant gaps by the end of that year.

In conclusion, the FCA’s action against Citigroup Global Markets Limited underscores the necessity for firms to implement regulatory requirements effectively and maintain robust compliance systems. Firms must ensure continuous monitoring and timely remediation of any compliance gaps to uphold market integrity and avoid significant penalties.