WSJ.com - U.K. Regulator Plans to Fine Citigroup Over Bond Trade
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As of Monday, May 30, 2005
EUROPEAN BUSINESS NEWS
U.K. Regulator Plans to Fine
Citigroup Over Bond Trade
By ADAM BRADBERY
DOW JONES NEWSWIRES
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May 30, 2005; Page C3
LONDON -- The U.K.'s Financial Services Authority intends to fine Citigroup Inc. for internal-control
failures related to a European bond trade it executed last August, according to a person familiar with the
situation.
The regulator's decision, which is expected to be announced in coming weeks, will come as a relief to the
New York bank, which wants to avoid charges of market manipulation on the trade.
In the Aug. 2, 2004 trade, which Citigroup traders had dubbed Dr. Evil, the firm sold 12.4 billion ($15.5
billion) of euro-zone government bonds, 11.8 billion of which it put through 11 electronic-trading
platforms operated by MTS Group. It then bought back 3.77 billion of bonds about 30 minutes later to
make a profit of an estimated $17.5 million (13.9 million) at the expense of market makers on the
platforms.
The regulator has approached Citigroup and other parties to consult them on their intentions and is currently
considering the size of the fine that will be levied, the person said.
The FSA is considering a fine of between 10 million and 50 million in order to signal the depth of its
concern about control failures at a large investment bank, the person said.
The FSA declined to comment on the situation.
A Citigroup spokeswoman referred to previous statements in which the bank expressed regret for the trade
and said it doesn't believe it violated any regulations.
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In January, German regulator BaFin said it believed there was evidence of possible market manipulation by
six Citigroup employees. But the Frankfurt state prosecutor decided there was no legal basis for a case.
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WSJ.com - U.K. Regulator Plans to Fine Citigroup Over Bond Trade
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The bank suspended five European government-bond traders in early February amid continuing regulatory
investigations at several European regulators. The bank's co-head of European government-bond trading,
Spiros Skordos, still works at the bank.
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Write to Adam Bradbery at adam.bradbery@dowjones.com
Citigroup Inc. (C)
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WSJ.com - U.K. Regulator Plans to Fine Citigroup Over Bond Trade
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