On September 16, the Hong Kong Securities and Futures Commission (SFC) announced a five-year industry ban on Richard Charles Heyes, a former responsible officer, key function officer, board member, and pan-Asian equity head at Citigroup Global Markets Asia Limited (Citigroup Global Markets). The ban is effective from September 15, 2025, to September 14, 2030.
Prior to this disciplinary action, the SFC had already penalized Citigroup Global Markets for allowing multiple trading desks within its cash equity business to send incorrectly labeled subscription indications to institutional clients and making false representations to these clients when executing facilitation trades over a ten-year period from 2008 to 2018, constituting serious regulatory violations and internal control failures.
The SFC determined that Citigroup Global Markets' violations and deficiencies were attributable to Heyes' failure to fulfill his duties as a responsible officer, key function officer, and senior management member of Citigroup Global Markets.
Mr. Christopher Wilson, Executive Director of the SFC's Enforcement Division, stated: "The primary responsibility of senior management at licensed corporations is to ensure that the firm maintains proper conduct standards and follows appropriate procedures. While Heyes placed heavy pressure on trading desks to enhance Citigroup Global Markets' market share, he failed to remain vigilant against obvious signs that his subordinates were using dishonest means to achieve this goal, demonstrating dereliction of duty and failure to properly fulfill his management responsibilities. As a result, his subordinates' misconduct was allowed to persist over an extended period due to his serious negligence, enabling a culture that sacrificed client interests and basic integrity standards in pursuit of profits to take root within Citigroup Global Markets."
Wilson continued: "The SFC will actively utilize the key function officer regime to identify delinquent senior management members and hold them accountable for their firms' deficiencies, thereby driving intermediaries to change their culture and behavior."
**Incorrectly Labeled Subscription Indications**
The SFC's investigation revealed that Heyes should have known that Citigroup Global Markets' equity sales trading desks routinely sent incorrectly labeled subscription indications to clients to generate client inquiries. Notably, although the SFC conducted a limited review of Citigroup Global Markets' business activities in 2014, which exposed other concerning matters regarding the company's subscription indication processes, Heyes failed to ensure that Citigroup Global Markets implemented adequate and effective control measures for issuing subscription indications.
Furthermore, despite receiving reports from his subordinates between 2017 and 2018 documenting client complaints about the quality and accuracy of Citigroup Global Markets' subscription indications, he took no steps to investigate these client complaints and consequently failed to take action to stop the practice of equity sales trading desks issuing incorrectly labeled subscription indications. His deficiencies allowed the desk's dishonest behavior to become entrenched.
**False Statements and Non-disclosure to Conceal Principal Nature of Facilitation Trades**
In mid-2014, Heyes attended an SFC roundtable meeting where the SFC outlined common issues discovered in client facilitation activities in the market, including failure to obtain explicit client consent. However, he failed to ensure that Citigroup Global Markets had adequate internal guidelines and compliance monitoring to verify whether traders had made pre-trade disclosures about Citigroup Global Markets' principal status and obtained prior client consent before executing facilitation trades.
Additionally, the SFC found that Heyes should have learned from emails sent or forwarded to him by his subordinates that traders were making false representations to clients, describing facilitation trades as agency trades in order to enhance market share. However, his failure to pay attention to these emails resulted in the traders' misconduct going unchecked.
The investigation findings show that Heyes failed to ensure that Citigroup Global Markets maintained proper conduct standards and followed appropriate procedures. His deficiencies included failing to ensure the establishment of adequate policy and system control measures to effectively monitor subscription indications issued by Citigroup Global Markets, comply with client consent and disclosure requirements for facilitation trades, and provide appropriate training to traders.
In determining the disciplinary penalty, the SFC considered all relevant circumstances, including: Heyes' serious negligence in fulfilling his management and supervisory duties, leading to serious internal control deficiencies and regulatory violations at Citigroup Global Markets that persisted for over ten years; despite his considerable experience in the industry, his conduct fell short of standards expected of responsible officers, key function officers, board members, and senior management of licensed corporations; the need to send a strong message to the industry that the SFC will not tolerate misconduct such as that committed by Heyes; and Heyes' cooperation in accepting the SFC's disciplinary action and withdrawing his appeal to the Securities and Futures Appeals Tribunal, with no previous disciplinary record.
According to records, Heyes was licensed under the Securities and Futures Ordinance to conduct Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), and Type 7 (providing automated trading services) regulated activities. He was affiliated with Citigroup Global Markets as a licensed representative from March 30, 2012, and was approved as its responsible officer from October 15, 2013, to July 1, 2020. He also served as Citigroup Global Markets' key function officer for principal business (equities) from July 12, 2017, to July 1, 2020. Heyes is currently not licensed by the SFC.
According to a previous press release dated January 28, 2022, the SFC reprimanded Citigroup Global Markets Asia Limited and imposed a fine of HK$348.25 million for allowing multiple trading desks within its cash equity business to send incorrectly labeled subscription indications to institutional clients and making false representations to these clients when executing facilitation trades from 2008 to 2018.