HONG KONG — Hong Kong's securities regulator Monday criticized and fined a Citigroup Inc. unit HK$6 million (US$770,394) for missing a "Ponzi scheme operating under its nose," and then later failing to report it to the Securities and Futures Commission in a timely fashion.
The scheme, which ran from 2004 until 2009, involved 13 Citigroup wealth management clients who invested through a former licensed representative, according to a statement from the regulator.
Citi suspended the representative, who is not named in the statement, while investigating the suspected misconduct and then dismissed him but failed to report the person's activities to the SFC in a timely manner, said the SFC.
The SFC also found that the individual was insufficiently supervised by Citi and said that his fraudulent scheme went undetected despite a number of "red flags."
The regulator has suspended the license of Lisa Chan for eight months until June 2012 and suspended her ability to act as a responsible officer. The statement didn't clarify Chan's title or role.
A Citigroup representative said: "We accept the decision and actions of the SFC and have already taken steps to further strengthen our prevention, supervisory and detection processes." He added Citi is cooperating with the SFC investigation and has agreed to compensate affected investors for their principal losses. The SFC didn't disclose how much money was involved in the scheme.
