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Last Updated: Tuesday, 28 June, 2005, 14:23 GMT 15:23 UK
Citigroup fined 14m by watchdog
Citibank branch
Citigroup still faces regulatory enquiries
Citigroup, the US owner of Citibank, is to be fined 13.9m ($25.31m) by the UK's Financial Services Authority (FSA) after a controversial bond trade.

The firm caused other City firms to lose money when it dumped a larger than usual number of eurozone bonds on the market, forcing prices down.

The fine is the largest penalty imposed on a financial firm by the FSA for a breach of market rules.

It is more than triple that of CSFB's 4m fine, the FSA's previous record.

Sizeable penalty

We will bring them [the six traders involved in the deal] back and they will be back at their desks in a week or so
Bill Mills, Citigroup

"It is substantially larger, which indicates how unhappy we were," said Rob McIvor, a spokesman for the FSA.

"What they did was careless and irresponsible and they have been fined accordingly."

The FSA said that the firm had lacked adequate controls.

However, in March, German authorities decided not to prosecute Citigroup over the event, saying there was insufficient evidence of criminal wrongdoing.

Regulatory strife

Citigroup made a profit of $18.2m (9.96m) on 2 August, 2004, after selling a large cash position in government bonds and the later buying back of bonds at a lower price.

The 13.96m FSA penalty is made up of two parts - Citigroup must relinquish the 9.86m profit it made on the sale and pay a 4m penalty.

Citigroup is committed to maintaining the highest standards of business ethics
Charles Prince, chief executive of Citigroup

While the fine is the largest imposed by the FSA on a financial firm it is not its highest - oil giant Shell was fined a record 17m for overstating its oil reserves in breach of listing rules.

But, it was not Citigroup's first run-in with regulators.

The group was forced to close its Japanese private bank after repeatedly breaking local rules. It also agreed to pay $2bn to settle a lawsuit brought by shareholders of collapsed energy trading firm Enron earlier this month.

Last year, it settled a $2.6bn lawsuit brought by investors in failed telecoms firm WorldCom, and had to put aside double that amount to cover future legal action.

Executives reinstated

Charles Prince, chief executive of Citigroup, welcomed the conclusion of the FSA's investigation.

"Citigroup is committed to maintaining the highest standards of business ethics, to advancing best practice leadership in all its businesses and to fostering a culture of compliance that is second to none," he said.

The company will now reinstate the six traders involved in the bond trade, according to Reuters.

"We will bring them back and they will be back at their desks in a week or so," said Bill Mills, chairman and chief executive of Citigroup's corporate and investment banking in Europe, Middle East and Africa.

"It's been a year that none of them will want to recreate."

He added that business in Europe had been affected by the bond trade, especially in terms of the new government bond business it had won.

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