June 12, 2024

Citigroup’s international broker-dealer arm was fined £61.6 million ($79 million) by British regulators over failings in its trading systems and controls.

Citi Global Markets Limited (CGML) was hit with two fines stemming from parallel investigations carried out between April 2018 and May 2022, which found that the firm did not have adequate due diligence and risk management systems, the Prudential Regulation Authority (PRA) said in a statement Wednesday.

The PRA fined Citi £33.9 million ($43 million) and the Financial Conduct Authority (FCA) imposed a £27.8 million ($36 million) penalty.

“Firms involved in trading must have effective controls in place in order to manage the risks involved. CGML failed to meet the standards we expect in this area, resulting in today’s fine,” said Sam Woods, CEO of the PRA.

The regulators said they reduced the fines by 30% because Citi agreed to resolve the matter.

“We are pleased to resolve this matter from more than two years ago, which arose from an individual error that was identified and corrected within minutes,” a spokesperson for Citi said. “We immediately took steps to strengthen our systems and controls, and remain committed to ensuring full regulatory compliance.”

During the investigation, the PRA found that weaknesses in Citi’s trading controls persisted, despite repeated warnings to strengthen its measures. In one significant trading incident, an inexperienced trader incorrectly inputted a $444 billion order, which was intended to be for just $58 million — a mistake known as a “fat finger” error.

As a result of primary control failings, mistaken orders worth $196 billion were generated in Citi’s electronic trading system, CitiSmart, resulting in $1.4 billion accidentally being executed on European exchanges before being canceled.

The PRA said Citi’s lack of preventative hard blocks and the inappropriate calibration of other controls contributed to the mishap, which took place on May 2, 2022. Citi is expected to resolve the issues identified by the PRA “promptly and completely.”

The London-headquartered business unit carries out investment-related activities in the UK, and has branches in France, Ireland, Italy, Spain, Greece, Switzerland, Sweden, Dubai, and Israel. Because of the firm’s size and importance within the UK market, the PRA remarked in its final notice that CGML “has the capacity to cause significant disruption to the UK financial system if it were to fail or by carrying on its business in an unsafe manner.”

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