By James Causton, Regulatory Sales Consultant, and Darren Lawrence, Compliance Sales Specialist, at SIX.
In recent months, the FCA has fined several firms with regards to breaches of market abuse regulation. The increasing focus of the UK’s FCA and other national competent authorities in the EU demonstrate a coordinated focus on improving standards and operational governance frameworks in market abuse detection and reporting.
Many firms are also facing additional challenges around post-Brexit divergence highlighted within the Edinburgh Reforms in December 2022. This series of consultation has a particular focus on:
- Ensuring a reduction in complexity in the UK’s financial sector
- Putting technology and innovation at the forefront of the UK’s strategy
- Safeguarding governance and oversight frameworks to deliver for investors
- Ensuring the UK financial sector is a leader in sustainable and responsible investment
The UK has also sought to toughen up its approach to insider trading and market manipulation by increasing the maximum sentence from seven to 10 years. The obligation for companies to maintain insider lists now also applies to persons acting on behalf of issuers, providing additional challenges for professional advisors and other related third parties.
For financial institutions, the only way to overcome this challenge is to ensure a robust, proportionate governance framework is in place. Having a technology-enabled solution is also paramount to the detection of potential instances of market abuse.
Failure to meet the demands of national competent authorities, such as the UK FCA and Central Bank of Ireland, with respect to the detection and reporting of market abuse may result in costly fines, but could also damage reputation and returns financial institutions can generate.
There is also increasing willingness to hold individuals to account as demonstrated by the FCA’s introduction of the Senior Managers and Certification Regime, as well as the publication of decision notices fining and banning three Mizuho bond traders for market manipulation – all of which illustrate the need for effective market abuse monitoring for efficient compliance as the regulatory landscape continues to evolve at a rapid pace.
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