Hong Kong’s SFC imposes $4m fine on Citigroup Global Markets Asia over alternative liquidity pool failures

Maria Nikolova

The company has been found to have overlooked that its system had defaulted certain clients as allowed to match trades in Citi Match, when their orders should not have been enabled access to ALP.

Citigroup Global Markets Asia Limited (CGMAL) has been fined and reprimanded by the Hong Kong Securities and Futures Commission (SFC) over failures by the company to comply with the regulatory requirements in relation to the operations of its alternative liquidity pool (ALP).

In its Statement of Disciplinary Action, the SFC explains that the $4 million fine is imposed pursuant to section 194 of the Securities and Futures Ordinance (SFO). Following a thematic review of ALPs conducted between 2016 and 2017, the SFC became concerned about CGMAL’s alternative liquidity pool, Citi Match. That is why the regulator investigated the operations of Citi Match.

Prior to December 1, 2015, CGMAL had prepared for compliance with the ALP requirements including reviewing the qualified investor status of some clients and providing them with the ALP Guidelines. However, it overlooked that its system had defaulted certain clients as allowed to match trades in Citi Match, when their orders should not have been enabled access to ALP.

The incorrect default setting was not detected until the SFC’s thematic review in 2016. As at August 1, 2016, the default setting of over 470 clients was incorrect and the orders of over 130 clients were routed to Citi Match for execution without the company having assessed the clients as qualified investors and without providing them with the ALP Guidelines.

According to the regulator, although the affected clients appear to be qualified investors, CGMAL was still responsible for them being fully informed as to how Citi Match operates by bringing the ALP Guidelines to their attention. The Consultation Conclusions Concerning the Regulation of ALPs have made it clear that “no matter how sophisticated a qualified investor is, it would still be crucial for the investor to be provided with comprehensive and accurate ALP Guidelines for the assessment of the risks and features of an ALP.”

In reaching the decision on the penalty, the SFC took into account a number of factors, including that CGMAL:

  • (a) took remedial actions to rectify the situation in August 2016 after the incorrect default setting issue was discovered in late July 2016. Subsequently, it also implemented enhanced measures to ensure compliance. The evidence suggests all users who were onboarded after August 2016 were qualified investors and were provided with the ALP Guidelines before their first access to Citi Match; and
  • (b) took the initiative to bring this matter to a conclusion by cooperating with the SFC to resolve the regulatory concerns.

Read this next

Metaverse Gaming NFT

Nas Academy and Invisible College introduce innovative model for Web3 education

Singapore-based online learning platform, Nas Academy is joining forces with Invisible College to teach people everything they need to know about the Web3.

Digital Assets

Top exec at BitMEX pled guilty US Bank Act violations, pays $150K fine

BitMEX’s head of business development, Gregory Dwyer pled guilty to violating the US Bank Secrecy Act (BSA) and allowing customers to use the platform to circumvent the federal anti-money laundering rules.

Retail FX

CySEC slaps €150,000 fine on FXBFI, operator of 101investing brand

The Cyprus Securities and Exchange Commission (CySEC) today announced that it has reached a settlement with FXBFI Broker Financial Invest Ltd, trading as 101investing, ordering the firm to pay €150,000 for violating the Investment Services and Activities and Regulated Markets Law.

Retail FX

X Open Hub expands multi-asset offering with new cryptocurrencies and indices

X Open Hub, a multi-asset liquidity provider, announced today that it has extended its offering with inclusion of 30 new cryptocurrencies and two emerging market indices.

Retail FX

Interactive Brokers now offers 24/7 access to crypto trading

Interactive Brokers Group, Inc. (NASDAQ: IBKR) has widened access to cryptocurrency trading for its clients. Specifically, the discount broker extended trading hours for its cryptocurrency products to be traded 24/7, including on the weekends.

Inside View

Natural Language Generation for Multi-Language Social Media Strategies 

Natural Language Generation (NLG) is a crucial growth area in the digital landscape, with the unique potential to be used across multiple industries.

Market News, Technology

The B2Core Android App is Now Available For Download

The first version of the B2Core Android app is available for download, and it has many beneficial features for users.

Digital Assets

XBO taps custodian Fireblocks ahead of crypto exchange’s launch

XBO.com has integrated with digital asset and crypto technology platform Fireblocks ahead of the crypto exchange’s upcoming launch.

Industry News

Appital raises another £1.7m after integrating with FactSet, FlexTrade, and TS Imagine

“Appital has a proven track record in securing partnerships with major EMS providers, executing brokers and a trading venue to address the lack of efficiency and control over existing bookbuilding and deal distribution processes.”

<