The Securities and Futures Commission ("SFC") has banned Mr. Richard Charles Heyes, former responsible officer ("RO"), Manager-In-Charge ("MIC") of Key Business Line, board member, and Head of Pan-Asia Equities at Citigroup Global Markets Asia Limited ("CGMAL"), from re-entering the industry for five years.¹

This follows the SFC's earlier sanctions in 2022 against CGMAL for regulatory breaches and internal control failures in its Cash Equities business, including the dissemination of mislabelled Indications of Interest ("IOIs") and misrepresentations to institutional clients in facilitation trades². The SFC has previously banned Mr. Philip John Shaw, another former RO and senior manager at CGMAL, from re-entering the industry for ten years, for his role in these regulatory breaches, noting that Shaw was actively involved in introducing and perpetuating dishonest practices and instructing subordinates to mislead clients³.

The latest action against Heyes highlights the SFC's continued focus on senior management accountability, particularly where inadequate oversight and control failings have allowed misconduct to persist.

SFC's Findings

In Heyes' case, the SFC did not find evidence of direct or actual knowledge or participation in the misconduct. Instead, the SFC concluded that Heyes, in his capacity as MIC and senior manager, failed to properly discharge his managerial and supervisory duties.

The findings centred on serious neglect in the following areas:

• Failure to Act on Red Flags: Heyes should have known about issues such as mislabelled IOIs and misrepresentations to clients by traders. The SFC noted that he received reports and emails recording client complaints and issues which could indicate potential misconduct, yet failed to take meaningful steps to investigate or remediate the issues.
• Inadequate Oversight and Controls: Heyes did not ensure that adequate controls, internal guidelines, or compliance monitoring were in place for IOI issuance and facilitation trades, particularly regarding disclosure and client consent. Despite regulatory guidance and industry warnings, he did not ensure the implementation or enforcement of effective procedures to prevent or detect misconduct.
• Allowing Commercial Pressures to Override Standards: By failing to address these issues, Heyes allowed a culture to develop where commercial pressures took precedence over client interests and regulatory standards. The SFC emphasised that his neglect enabled dishonest conduct to persist and undermined the integrity of the CGMAL's operations.

Senior Management Accountability and Key Takeaways

The SFC's latest decision makes clear that senior management will be held personally accountable where the SFC considers that they have failed to properly discharge their managerial and supervisory duties, even if they did not have direct or actual knowledge of the specific misconduct.

This case highlights several important implications for senior management:

• Neglect and Culture Matter as Much as Direct Involvement: The SFC has made clear that a lack of direct knowledge does not absolve senior managers of liability. The SFC expects senior management to be vigilant and proactive in identifying and addressing risks within their areas of responsibility. Negligence or inaction, such as failing to investigate complaints, ignoring warning signs, or not implementing effective controls, can lead to personal consequences. The decision also highlights the importance of senior management setting appropriate standards and exercising proper oversight, particularly where commercial objectives might otherwise override client interests and regulatory requirements.
• Oversight, Escalation, and Proactivity are Essential: The SFC expects senior managers to actively oversee their business lines, rather than relying solely on subordinates or existing processes. This involves regularly reviewing management information, addressing complaints or anomalies, and ensuring that controls are both effective and enforced. The decision also highlights the importance of fostering an environment where staff members are encouraged to escalate concerns and management responds appropriately to red flags, with clear escalation channels and accountability for failures to act.
• Delegation Not a Defence: While senior managers may delegate tasks, they remain ultimately accountable for the proper discharge of their managerial and supervisory responsibilities. The SFC expects senior managers to ensure that delegated duties are subject to effective oversight, with clear reporting lines and escalation procedures in place. Institutions should also maintain proper records of management oversight, decision-making, and any remedial actions taken in response to identified risks or incidents.

Conclusion

The SFC's last action demonstrates that senior management can be held personally accountable for serious neglect, even in the absence of direct or actual knowledge of misconduct. Institutions should ensure that their senior managers are proactive, vigilant, and fully engaged in their oversight responsibilities, with a clear focus on fostering a culture of compliance and accountability throughout the organisation.

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¹SFC bans Citigroup Global Markets Asia Limited’s former responsible officer Richard Charles Heyes for five years.
²SFC reprimands and fines Citigroup Global Markets Asia Limited $348.25 million for serious regulatory failures over client facilitation activities.
³SFC bans Citigroup Global Markets Asia Limited’s former responsible officer Philip John Shaw for 10 years.