The party involved the Former responsible officer, board member and Head of Pan-Asia Execution Services of Citigroup Global Markets Asia Limited (CGMAL).
The Securities and Futures Commission (SFC) has taken disciplinary action against CGMAL for severe violations of regulations and inadequacies of internal control. Specifically, from 2008 to 2018, various trading desks under its Cash Equities business were found to have made misrepresentations to institutional clients when executing facilitation trades. These misrepresentations include mislabeling of Indications of Interest (IOIs) and inaccurate information regarding the execution prices and volumes.
It was found that
- In 2015, Shaw introduced a mechanism for its Equities Sales Trading Desk to create mislabelled IOIs. These IOIs were not backed by potential orders or interests from specific clients. Instead, they were identified as “Natural”, “In Touch With”, and/or “P:1”. Shaw’s description of such IOIs as “the fakes” and “fake flow” suggests that he did not believe them to be correctly labelled.
- Despite the numerous complaints from clients regarding the quality and accuracy of IOIs, Shaw did not take any measures to stop the dissemination of mislabelled IOIs. Instead, he misrepresented facts to the clients that these IOIs were classified in accordance with industry standards.
- On a separate occasion, when another trader had given a more accurate description to a client about the source of liquidity for one of these advertised facilitation flow IOIs, Shaw instructed the trader to refrain from being honest with clients and instructed them to mislabel IOIs as “Natural”.
- He allowed subordinates to commit misconduct when executing facilitation trades.
Therefore, after an investigation by SFC, SFC banned Philip John Shaw from being licensed for 10 years and fined CGMAL $348.25 million in Jan 2022.