Tribunal upholds fraud verdict against ex-Citi Asia staffer

Hong Kong's Securities and Futures Appeals Tribunal upheld a verdict to ban a former Citigroup Global Markets Asia representative from re-entering the industry, although lessened his expulsion from life to 10 years.

The Securities and Futures Commission previously found that Ramesh Kumar Chuharmal Sadhwani had operated a fraudulent scheme involving 13 Citi Asia wealth management clients.

These clients had invested with Citi Asia on the basis of representations made by Sadhwani that their money would be pooled and used to purchase US Treasuries and other products, the SFC reports on its website. 

Sadhwani promised affected customers that their principal was protected and that returns were guaranteed by Citi Asia. Instead, returns were funded wholly or partly from other affected clients induced by Sadhwani’s representations. 

Sadhwani’s scheme operated from 2004 to February 2009 until it was discovered by Citi Asia. Sadhwani left Hong Kong shortly afterwards.

In passing judgment at the tribunal, the chairman of SFAT, the Honourable Mr Justice AR Wright, stated that Sadhwani's conduct was "fully deserving of the conclusion that he is not a fit and proper person to be licensed".

He added: "Whatever descriptive label one applies to that conduct it remains fraudulent -- which word I use in the everyday sense rather than in the sense of any criminal determination -- reprehensible and cynically in breach of the trust reposed in the applicant [Sadhwani] by his clients as well as in breach of the internal policies of Citi."

As a result of a separate action, Citi Asia is assessing the loss to each of the 13 clients and will make them whole to the principal amounts they invested.

Mark Steward, the SFC’s executive director of enforcement, added: “Sadhwani’s conduct was gravely dishonest, causing financial loss to his clients as well as emotional stress to them and their families. Sadhwani lacks the propriety and the fitness to be authorised by the SFC to conduct securities business in Hong Kong and will remain so for at least 10 years.”

Sadhwani had been licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities) and Type 2 (dealing in futures contracts) regulated activities and was accredited with Citi Asia until he was dismissed on February 16, 2009.

He was employed by Citi Asia’s private banking division at the time of the conduct in question. His ban will stretch from March 23 this year to March 22, 2022.

As a result of the same investigation, last October the SFC took disciplinary action against Citi Asia and Lisa Chan Sin Man, who was Sadhwani's supervisor.

It reprimanded Citigroup Global Markets Asia, fined it $6 million and suspended the approval granted to Chan to act as responsible officer. Her licence was also suspended for eight months from October 3 last year to June 2, 2012. 

It ruled that after initially reporting to the SFC that Sadhwani had been dismissed for gross misconduct, Citi informed the SFC that an internal investigation was in progress, when in fact a preliminary report was already available which revealed important information in relation to his apparent fraudulent scheme. Citi Asia did not provide the report to the SFC until after a follow-up investigation by Citi Asia’s external auditor was completed. 

By the time these reports were provided to the SFC, Sadhwani had left Hong Kong. The SFC found that while this was not Citi Asia’s intention, the consequence of the delay meant that the SFC and other law enforcement agencies had no opportunity to interview Sadhwani or secure his whereabouts pending completion of the investigation. 

The SFC also found that Sadhwani was insufficiently supervised by Citi Asia with the result that his fraudulent scheme went undetected despite a number of “red flags” which should have caused those supervising him to instigate inquiries.