Hong Kong’s Securities and Futures Commission (SFC) has banned Mr Richard Charles Heyes, a former responsible officer, Manager-In-Charge of Key Business Line, board member, and Head of Pan-Asia Equities of Citigroup Global Markets Asia Limited (CGMAL), from re-entering the industry for five years.

The ban will run until 14 September 2030.

The disciplinary action follows the SFC’s earlier sanctions against CGMAL for serious regulatory breaches and internal control failures in allowing various trading desks under its Cash Equities business to disseminate mislabelled indications of interest (IOIs) and make misrepresentations to institutional clients when executing facilitation trades over a 10-year period from 2008 to 2018.

The SFC has found that CGMAL’s breaches and failings were attributable to Heyes’ failure to discharge his duties as an RO, MIC and a member of CGMAL’s senior management.

The SFC’s investigation revealed that Heyes should have known that it was the practice of CGMAL’s Equities Sales Trading Desk to send mislabelled IOIs to clients with a view to provoking client enquiries.

Notably, he failed to ensure that CGMAL had implemented adequate and effective controls on issuance of IOIs despite the fact that a limited review of the business activities of CGMAL conducted by the SFC in 2014 had exposed other concerns in relation to the firm’s IOI process.

In addition, despite having received reports from his subordinates between 2017 and 2018 recording client complaints about the quality and accuracy of CGMAL’s IOIs, he did not take any step to investigate the client complaints, and therefore no step was taken to stop the dissemination of mislabelled IOIs. His failures allowed the dishonest conduct of the desk to take hold.

In mid-2014, Heyes attended an SFC roundtable meeting, during which the SFC highlighted common issues found in client facilitation activities in the market, including missing explicit client consent. However, he failed to ensure that CGMAL had adequate internal guidelines and compliance monitoring to check that traders had made pre-trade disclosure of CGMAL’s principal capacity and obtained clients’ prior consent before executing facilitation trades.

Furthermore, the SFC found that Heyes ought to have learnt from emails addressed or forwarded to him by his subordinates that traders were misrepresenting facilitation trades as agency trades to clients in order to gain additional market share. However, as he failed to take note of the relevant emails, the traders’ misconduct went unchecked.

These findings demonstrate that Heyes had failed to ensure that CGMAL maintained appropriate standards of conduct and adhered to proper procedures. His lapses included failing to ensure that adequate policies and systems controls were in place to effectively monitor the issuance of IOIs and the compliance with consent and disclosure requirements of facilitation trades, and that proper training had been provided to traders.

In deciding the disciplinary sanction, the SFC has taken into account a variety of factors, including:

• Heyes’ neglect in discharging his management and supervisory responsibilities was serious, thereby enabling CGMAL’s grave internal control failures and regulatory breaches to prevail for over 10 years;
• the fact that his conduct fell short of the standards expected of an RO, an MIC, a board member and a member of the senior management of a licensed corporation;
• the necessity to send a clear and strong message to the industry that the SFC will not tolerate misconduct such as Heyes’; and
• Heyes’ cooperation with the SFC in accepting the disciplinary action and withdrawing his appeal to the Securities and Futures Appeals Tribunal and his otherwise clean disciplinary record.