Search

Countering market abuse

The FCA has been providing more reminders to firms to treat market abuse as a sub-set of financial crime. Both insider dealing and market manipulation are criminal offences. Both offences need some form of engagement with, or access to, financial markets. FCA expects you to make sure your firm is not used to further financial crime. But what does this actually mean in practice?

The relatively new chapter in FCA’s financial crime guide provides some insights. FCA is defining insider dealing and market manipulation as financial crime for the first time. FCA sees both offences as predicate offences to money laundering.

New Offences

Translated this means that funds arising from either insider dealing or market manipulation are proceeds of crime. This brings with it the offences of:

  1. Failing to report a suspicion of money laundering. You may need to submit a Suspicious Activity Report (SAR) to the National Crime Agency. As the proceeds of insider dealing or market manipulation could be proceeds of crime. It's no longer just a question of submitting a Suspicious Transaction Order Report (STOR).

  2. Tipping off You are potentially committing an offence if you disclose a SAR or an investigation into insider dealing or market manipulation.

New Obligations

Market abuse rules impose a requirement to detect and report suspected market abuse. The financial crime requirement goes further than that. You are required to counter the risk of insider dealing and market abuse.

This means thinking much more about pre-trade risks. That doesn’t only mean having good surveillance. It also means having client and market facing people who will raise concerns.

If you have clients or employees who have traded suspiciously you now need to mitigate any risks of their future activities. Worse case you might need to consider ending the relationship.

Governance

Practically speaking this means making sure your committee members are trained on insider dealing and market manipulation. Review your committee’s terms of reference. Consider whether any reporting needs to be re-routed or enhanced.

There is now an overlap between the SMF 16 (Head of Compliance) and SMF 17 (Money Laundering Reporting Officer). It is important to document how they hand off to each other to clarify assumptions about respective responsibilities. Such as involving your MLRO in your efforts to counter criminal insider dealing or market manipulation.

Risk Assessment

Take another look at your risk assessment. The FCA expects you to be conducting a market abuse risk assessment, can you enhance your existing financial crime risk assessments, or do you need something separate?

Clarity for your people

The best support for your people is clear guidance so they understand what it means for them personally. You can achieve this with clear standards and examples.

You should already have policies and procedures (standards) that cover market abuse. Review these to make sure they explicitly consider insider dealing and market manipulation as a financial crime risk.

You can help your people understand what those standards mean to them by providing examples. These can be part of the policies and procedures, added to training, or stand-alone messages as part of a wider internal awareness campaign.

8 views
How to Guide: MiFID II Transaction Reporting

How to Guide: MiFID II Transaction Reporting

SMCR Checklist

SMCR Checklist

Training on PRA & FCA outsourcing

Training on PRA & FCA outsourcing

Bribery and Corruption Risk Assessment

Bribery and Corruption Risk Assessment

Training Pack: Suspicious Transaction Order Reporting (STOR)

Training Pack: Suspicious Transaction Order Reporting (STOR)

Brexit Substituted Compliance Inventory

Brexit Substituted Compliance Inventory

Conflicts of Interest Register Template

Conflicts of Interest Register Template

UK Financial Crime Inventory

UK Financial Crime Inventory

Fit and Proper Assessment Template

Fit and Proper Assessment Template

UK Public General Acts Inventory

UK Public General Acts Inventory

Reasonable Steps Templates

Reasonable Steps Templates

PRA & FCA Outsourcing Checklist

PRA & FCA Outsourcing Checklist

Need some compliance advice?

Want to check best practice or request advice on your approach. Need technical support with your audit or monitoring review? Request a private consultation by video conference.

 

We offer 45 minute sessions by video conference.

regulatory consulting companies

fca compliance procedures

financial services compliance consultants

regulatory compliance consulting firms

regulatory consulting companies     fca compliance procedures     financial services compliance consultants     regulatory compliance consulting firms

©2020 by Leaman Crellin Limited