News and Views
The FCA sets out Market Abuse expectations during COVID-19 period
Posted on 22 Jul 2020
The current pandemic requires the majority of employees in financial services to work from home and the FCA is reminding firms that it is constantly monitoring, investigating and will take action against any market abuse related conduct.
On 27th May 2020, the FCA published the ‘Market Watch 63’ Newsletter (the ‘Newsletter'). This outlines the FCA’s expectations for market conduct in the context of ‘increased capital raising events’ and alternate working arrangements (i.e. working from home) due to COVID-19.
Whilst the FCA understands that there are operational challenges arising from the pandemic, the financial regulator still expects all market participants, including issuers, advisors and anyone who handles inside information to continue to act in a way that ‘supports the integrity and orderly functioning’ of the financial services industry. Specifically, complying with the Market Abuse Regulations (‘MAR’).
Within the Newsletter the FCA highlights five key points where they will be particularly focused on during the COVID-19 pandemic. One of the key points of focus is what the FCA expects from firms in relation to their market surveillance - due to the changes in the market conditions and the ‘working from home’ (‘WFH’) requirements.
FCA’s surveillance expectations
This is a reminder from the FCA that firms must oblige to their surveillance obligations related to MAR. In particular, firms are expected to have effective surveillance systems and controls in place to identify any potential risks related to MAR.
Firms should be assessing the MAR risks that could arise within their business areas, including the situation of new working environments/conditions. They should continue to assess the systems and controls that are in place and how effectively they can mitigate identified risks.
The FCA goes further and provides examples of controls that firms could implement, i.e. a ‘mandatory 2-week holiday for front office staff may be appropriate’ or repeating MAR training for staff to refresh their memory on how they should be handling inside information.
Additionally, it is important to remind firms that they should ensure their approach is designed for the specific new risks that they are exposed to and does not diminish the appropriateness and effectiveness of their compliance surveillance methods.
Whilst WFH continues for many financial services firms - the FCA stresses that it will continue to monitor the primary and secondary market activities which may impact the integrity and orderly function of the financial market.
The FCA states that they will continue using their powers to request information when needed and make enquiries where they identify behaviour which could be abusive or in danger of creating a ‘disorderly market’.
Furthermore, the FCA will ask for further information on how firms are meeting their regulatory obligations and where necessary, enforce their powers to take action against firms who breach their rules.
How can we help?
At Laven, our consultants are on hand to help identify the actions your firm needs to take to ensure you are compliant and aware of all the risks outlined in this update. Whether this is through assisting with new policies and procedures that need to be put in place or providing online training for staff to make them fully aware of the regulatory burden.
Laven has also built Laven Tech software solution that leverages advanced technology combined with our vast subject matter expertise. Laven Tech is designed to assist fund managers, service providers and investors to meet today’s growing demands.