As International Adviser reported last October, Ramesh Kumar Chuharmal Sadhwani – previously referred to as “Mr X” by the Securities and Futures Commission (SFC) – was found to have operated a “Madoff-style” scheme involving 13 Citi Asia clients, between 2004 and February 2009.
To entice clients into the scheme, Sadhwani claimed that their money would be pooled and used to purchase US treasuries and other products. Sadhwani also falsely promised the customers that their principal was protected, and that returns were guaranteed by Citi Asia.
In reality, returns from the scheme were funded wholly or partly from other affected clients.
Citi Asia suspended Sadhwani during an internal investigation and later fired him for gross misconduct. However, the company failed to report his activities to the SFC in a timely manner, allowing Sadhwani to flee to India after his dismissal and avoid further questioning.
The regulator fined Citi Asia HK$6m ($770,000) for the reporting delay, and also suspended the licence of Sadhwani’s supervisor, for her failure to sufficiently on several “red flags” which were brought to her attention, and which would have detected Sadhwani’s behaviour much earlier.
‘Gravely dishonest’
Today’s ruling was made by the Securities and Futures Appeals Tribunal, which upheld the SFC’s decision to ban Sadhwani but reduced the length of the punishment from life to ten years.
Mark Steward, the executive director of enforcement at the SFC, said: “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 ten years”.
As a result of a separate action, Citi Asia is assessing the losses to principal suffered by the 13 clients in question and will compensate them accordingly, the regulator added.
