SFC Imposes 10-Year Ban on Citigroup Global Markets Asia’s Ex-Officer

Hong
Kong’s Securities and Futures Commission (SFC) announced on Monday that it had banned Philip John Shaw, a former responsible officer, board member and Head of
Pan-Asia Execution Services of <a href=”https://www.financemagnates.com/tag/citigroup-global-markets/” target=”_blank” rel=”follow”>Citigroup Global Markets</a> Asia Limited (CGMAL),
for serious regulatory breaches. According to the regulator’s statement, Shaw cannot
re-enter the financial industry for the next ten years until 3 March 2033.Citigroup’s John Shaw
Banned for 10 YearsThe SFC
imposed disciplinary measures on Shaw due to CGMAL’s significant regulatory
violations and internal control shortcomings between 2008 and 2018. The SFC
identified Shaw’s failure to fulfil his duties as a responsible officer and
senior management member of CGMAL as the leading cause of the company’s breaches.Shaw
introduced a mechanism to facilitate the bulk generation of mislabelled
Indications of Interest (IOIs) by CGMAL’s Equities Sales Trading Desk involving
some of the market’s most actively traded blue-chip stocks. Such IOIs were not
backed by any potential order or interest from specific clients, but they were
tagged as “Natural” and “In Touch With” to provoke
client inquiries. Although
the quality and accuracy of the IOIs had drawn client complaints, Shaw did not
stop the dissemination of mislabelled IOIs and represented to the clients that
they were classified in accordance with industry standards. On one
occasion, after a trader had told a client that CGMAL advertised facilitation
flow using “Natural” IOIs, Shaw instructed the trader to refrain from
being honest with clients about the source of <a href=”https://www.financemagnates.com/terms/l/liquidity/” class=”terms__main-term” id=”47c3bef3-27ee-4953-8504-159e1b829b33″ target=”_blank”>liquidity</a> behind such IOIs. Additionally,
he misrepresented the client to perpetuate the falsehood created by the
mislabelled IOI.SFC Indicates a Long List
of Shaw’s BreachesSince at
least 2015, Shaw has given factually incorrect information to the client or taken
positive steps to conceal the principal nature of the trade. The SFC also found out
that the banned professional made misleading statements, remained silent or was
not explicit with the client about the involvement of the Facilitation Desk and
failed to obtain the client’s consent before routing the order to the
Facilitation Desk for <a href=”https://www.financemagnates.com/terms/e/execution/” class=”terms__secondary-term” id=”60010adb-9e25-4bff-9822-c9210deec853″ target=”_blank”>execution</a>. Christopher
Wilson, the SFC’s Executive Director of Enforcement, said the sanction against
Shaw is warranted. “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.” The SFC’s
decision to ban Shaw from re-entering the industry for ten years sends a clear
and strong message that the SFC will not tolerate similar misconduct. The SFC’s <a href=”https://www.financemagnates.com/tag/enforcement/” target=”_blank” rel=”follow”>enforcement </a>action serves to remind senior management of licensed
intermediaries that they are responsible for maintaining appropriate standards
of conduct and adherence to proper procedures within their firms.Wilson
added that “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.”In December
2022, the SFC <a href=”https://www.financemagnates.com/institutional-forex/sfc-fines-guosen-securities-hk28-million/” target=”_blank” rel=”follow”>fined Guosen Securities (HK) Brokerage Company, Limited</a> (Guosen)
HK$2.8 million for failing to properly handle client assets and accounts. Additionally,
to reduce the risks associated with the futures industry and
regulated futures brokers, the SFC <a href=”https://www.financemagnates.com/forex/hong-kongs-sfc-proposes-risk-management-rules-for-futures-brokers/” target=”_blank” rel=”follow”>has proposed several new market mechanisms</a> currently subject to open consultation.