SFC bans former Citigroup Global Markets Asia officer for 10 years

The Hong Kong Securities and Futures Commission (SFC) today announced it has banned former Head of Pan-Asia Execution Services of Citigroup Global Markets Asia Limited (CGMAL), Philip John Shaw, for ten years.

The recent ban follows sanctions imposed on the company for regulatory breaches and internal control failures. According to the Hong Kong watchdog, the bank allowed various trading desks under its Cash Equities business to spread mislabelled Indications of Interest (IOIs) and make misrepresentations to institutional clients when executing facilitation trades. The alleged breaches took place between 2008 and 2018.

The SFC further claims that Citigroup’s breaches can be attributed to Shaw’s failure to fulfill his duties as part of the senior management.

Shaw implemented a system to simplify the production of mislabeled Indications of Interest (IOIs) for CGMAL’s Equities Sales Trading Desk, which involved some of the market’s most actively traded blue-chip stocks. These IOIs were not supported by any potential orders or interest from specific clients but were labeled as “Natural” and “In Touch With” to prompt client inquiries. Despite receiving client complaints about the quality and accuracy of the IOIs, Shaw did not halt the dissemination of mislabeled IOIs and falsely claimed that they were classified according to industry standards.

Hong Kong regulator SFC

When a trader told a client that CGMAL advertised facilitation flow using “Natural” IOIs, Shaw instructed the trader to deceive clients about the source of liquidity behind such IOIs. Furthermore, he misrepresented the client to maintain the falsehood created by the mislabeled IOI.

Since at least 2015, Shaw has provided inaccurate information to clients or taken affirmative steps to conceal the principal nature of the trade. The SFC also discovered that the banned professional made misleading statements, remained silent or was not explicit with the client about the involvement of the Facilitation Desk and neglected to obtain the client’s consent before routing the order to the Facilitation Desk for execution.

Christopher Wilson, the SFC’s Executive Director of Enforcement, said:

A key concern of the SFC is that Shaw had, through his misconduct, engendered a culture of chasing revenue at the expense of client interests and basic standards of honesty within CGMAL.  In the circumstances, his conduct fell far short of the standards expected of a member of senior management of a licensed intermediary and the sanction against him is warranted.

He added:

The disciplinary action against Shaw also underscored the SFC’s determination to hold errant senior management accountable for their firms’ failures. This is imperative for driving changes in the culture and behavior of intermediaries.

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