Citigroup Fined By FSA Over Eurobond Transaction

by Robin Pilgrim, LawAndTax-News.com, London

30 June 2005

The UK's Financial Services Authority announced on Tuesday that it has fined Citigroup Global Markets Limited (CGML) £13.9 million for breaching FSA Principles 2 and 3 by failing to conduct its business with due skill, care and diligence and failing to control its business effectively.

The FSA found that CGML executed a trading strategy on the European government bond markets on 2 August 2004 which involved the firm building up and then rapidly exiting from very substantial long positions in European government bonds over a period of an hour.

The trade caused a temporary disruption to the volumes of bonds quoted and traded on the MTS platform, a sharp drop in bond prices and a temporary withdrawal by some participants from quoting on that platform.

Hector Sants, FSA Managing Director for Wholesale Business, explained that:

"The FSA views firms' adherence to its principles as fundamental in helping to maintain efficient, orderly and fair markets."

He continued:

"CGML planned, authorised and executed a trading strategy without having due regard to the risks and likely consequences of its action for the efficient and orderly operation of the MTS platform. Furthermore the lack of adequate systems and controls meant that the strategy was never fully considered, as would be expected, at an appropriate senior level within CGML."

"The FSA expects high standards from all its regulated firms but especially from firms such as CGML, whose size and resources allow them to trade in large volumes and take significant risks."

Recommended