ARTICLE
28 August 2015

US Securities And Exchange Commission Charges Citigroup Global Markets For Compliance And Surveillance Failures

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A&O Shearman

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A&O Shearman was formed in 2024 via the merger of two historic firms, Allen & Overy and Shearman & Sterling. With nearly 4,000 lawyers globally, we are equally fluent in English law, U.S. law and the laws of the world’s most dynamic markets. This combination creates a new kind of law firm, one built to achieve unparalleled outcomes for our clients on their most complex, multijurisdictional matters – everywhere in the world. A firm that advises at the forefront of the forces changing the current of global business and that is unrivalled in its global strength. Our clients benefit from the collective experience of teams who work with many of the world’s most influential companies and institutions, and have a history of precedent-setting innovations. Together our lawyers advise more than a third of NYSE-listed businesses, a fifth of the NASDAQ and a notable proportion of the London Stock Exchange, the Euronext, Euronext Paris and the Tokyo and Hong Kong Stock Exchanges.
In additional to paying the penalty, CGMI has agreed to hire a consultant to review and recommend improvements to the firm's trade surveillance and advisory account order handling and routing.
United States Corporate/Commercial Law

On August 19, 2015, the US Securities and Exchange Commission announced that Citigroup Global Markets Inc. (CGMI) agreed to pay a $15 million penalty in connection with settling charges for failing to enforce policies and procedures to prevent and detect securities transactions that could involve the misuse of material, nonpublic information. Additionally, CGMI agreed that they had failed to implement policies and procedures to prevent and detect principal transactions conducted by an affiliate.

According to the SEC's order, CGMI violated Section 15(g) of the Securities Exchange Act of 1934 requiring brokers and dealers to establish, maintain and enforce policies and procedures to prevent the misuse of material, nonpublic information. The SEC's order also found that CGMI violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-(7) requiring registered investment advisers to adopt and implement written policies and procedures reasonably designed to prevent violations of the Advisers Act and its rules. In additional to paying the penalty, CGMI has agreed to hire a consultant to review and recommend improvements to the firm's trade surveillance and advisory account order handling and routing.

The press release is available at: http://www.sec.gov/news/pressrelease/2015-171.html.

The SEC order is available at: http://www.sec.gov/litigation/admin/2015/34-75729.pdf.

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