Citadel Securities Agrees to $97 Million Settlement in China

(Bloomberg) -- Citadel Securities LLC agreed to pay a 670 million-yuan ($97 million) settlement for alleged trading irregularities during the 2015 market rout in China.

The settlement was announced by the China Securities Regulatory Commission in a statement on its website. With that, the regulator has ended investigation into suspected account and asset management rule violations, it said, without giving more details. Citadel has tightened its internal controls accordingly, said the CSRC.

The settlement may free Citadel Securities to resume an expansion in China, which this year is opening up its $45 trillion market to wider foreign access. Overseas firms have been allowed to set up their own entities to trade futures this month while foreigners will be able to apply for licenses to start wholly owned mutual fund management and securities firms in April.

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“Citadel Securities has worked closely with the CSRC through the reconciliation process to reach this agreement,” Zia Ahmed, a spokesman for the firm, said in a statement. “Constructive resolution of this matter was important to Citadel Securities as China continues to expand opportunities for foreign participation in its financial markets.”

In a see-saw regulatory probe, the watchdog first in 2017 proposed to fine three local brokerages 416 million yuan for violating margin financing and short-selling rules when facilitating trades for the Shanghai unit of Citadel Securities, but later cleared the firms in 2018.

The local unit of Citadel Securities, the trading firm started by Ken Griffin, had accounts frozen by Chinese exchanges in 2015 as authorities probed whether algorithmic traders were disrupting the market. The $5 trillion rout prompted the nation’s most wide-ranging financial industry probe, entangling local banking executives, officials at the securities regulator and a prominent hedge-fund manager.

Citadel Securities’ settlement is more than four-fold the amount Goldman Sachs Group Inc. agreed to pay in a case related to how it interacted with its local joint venture partner.

The settlements underscored Chinese regulators’ willingness to use new approaches to supervision as they increase scrutiny of financial markets. Fines and confiscations levied by the CSRC reached a record $1.59 billion in 2018, according to official data.

The futures units of Beijing-based Citic Securities Co. and Shenzhen-headquartered Guosen Securities Co. were among four other firms that also agreed to settlements with the regulator, according to Monday’s statement.

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