Julia Hoggett has spoken on FCA’s views on compliance with market abuse prevention laws. She stressed the importance of a regulatory system (both regulators and firms) working to prevent abuses from happening, as this will always be more effective than a system that merely detects when an event has happened.
She noted that firms will need effective risk assessments and to continually assess how their systems and controls should evolve and that MAR compliance requires a series of situational judgements to be made.
Firms should also be clear in taking responsibility for their staff’s understanding and vigilance, and firms in the investment banking and advisory platform sector need to do more in terms of access controls, surveillance capabilities and the general mindset.
She used the FCA’s 5 conduct questions to assess how firms should react to market abuse and its risks:
- risk identification – including criminal versus regulatory risks, and inside information controls
- supporting individuals to conduct business appropriately – and this is not only trader behaviour
- inside information systems and controls – firms should not place over-reliance on the permissions process for insider lists and deal terms and should think critically about the front-to-back information management they need to have in place
- financial crime and market abuse – and the need for interplay with financial crime prevention systems and controls as certain forms of market abuse are a financial crime. The industry can also do more to surveil for market manipulation in key markets, especially the non-equities markets; and
- proper market conduct falls to be assessed under a number of the key questions and goes to the ability of both individuals and the firm to understand risks – she gave a number of examples of situations in which firms should be helping their employees to understand the correct course of conduct