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June 10, 2019

Citi faces administrative action in Japan over trade surveillance failures

The Financial Services Agency (FSA) in Japan has taken action against the securities arm of Citi for violations in trade surveillance.

The decision followed an inspection of Citigroup Global Markets Japan by the Securities and Exchange Surveillance Commission (SESC).

In the inspection, SESC found that the firm failed to deliver certain transaction data related to trade surveillance.

This was said to be due to failures in the firm’s market derivatives trading control system.

Moreover, the firm was accused of inappropriately narrowing down the trade surveillance coverage.

At the same time, it was revealed that the firm failed to include market derivative transactions carried out in the evening trading markets due to failures in its trade surveillance system.

The inspection also flagged the firm’s failure to take remedial measures even after receiving alerts on suspicious market frauds by a trader.

Under FSA’s order, the firm has to improve its business management, rebuild compliance, and put in place preventive actions.

The regulator has directed the firm to submit the first report on the review on 5 July 2019.

The securities unit of Citigroup has been embroiled in several legal issues in the recent past.

In July 2018, the securities unit was fined by the Hong Kong regulator over dark pool breaches.

Later last year, the division was again fined for violations associated with dark pool trading.

Last August, Citigroup and Citigroup Global Markets were fined $5.75m for unauthorised trading and lack of effective controls.

In December 2017, Citigroup Global Markets was fined $11.5m by the FINRA for displaying inaccurate research ratings.

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