Morning Coffee: Citi's internal auditors are its new most important people. Hedge funds love non-compete clauses

Citi's internal audit function, traditionally a lower-paid corner of financial services, has become central to the bank's efforts to exit consent orders imposed by the Federal Reserve Board and the Office of the Comptroller of the Currency about six years ago. Those orders followed findings that Citi's risk management, data management and internal controls were insufficiently robust. According to Reuters, the bank's internal auditors have been reviewing remediation work before it is presented to regulators, which could streamline regulatory sign-off and avoid extensive checks. Per eFinancialCareers, regulatory filings show London's 487 senior bankers and traders averaged $1.5m each in 2025, against $586k for seven senior control staff, of whom internal auditors are a part.

Auditors reportedly identified an issue related to data tracing and the origin of data in Citi's aggregated accounts earlier this summer. It is not clear whether that issue is delaying the lifting of the consent order. Citi CEO Jane Fraser said in July that the bank was "largely now operating at the Citi target state" and that at least 90% of the work had been done and validated by auditors, internal or external. Citi declined to comment for the article, telling Reuters it would not speculate on the consent orders, which remain at regulators' discretion, and that its risk and control environment changes are intended to be sustainable. Citi was due to report Q3 results the same day. Lifting the order would reduce costs and affect staffing in control functions that were expanded after the order, and Citi has been cutting some of those roles in recent months.

Separately, UK Labour figure Andy Burnham has argued that non-compete clauses have "gone too far" and are holding companies back. Per the Financial Times, hedge funds object that non-competes protect "commercially sensitive information" and "the proprietary investment strategies that underpin the alternative asset management industry." Opponents of abolition argue that without non-competes, firms would have to fragment strategies so no individual sees the full process, and junior staff would gain access to sensitive information. eFinancialCareers notes that Citadel places even some analysts on non-competes.

The newsletter also briefly covered other industry moves: Citi hired Eoghan Harrington and Christoph Heuer from BNP Paribas as managing directors in its financial sponsors team across UK, Europe, the Middle East and Africa (Financial News); Jump Trading acquired Ito Markets and hired its founders, Affaan Mustafa and Alejandro Soumah Fernandez, to build a compute trading desk (Bloomberg); and Lone Pine has given back nearly all of its 44% year-to-date gain through June after wrong-way stock bets and short positions (Bloomberg).