FCA Market Watch 63 – Market Conduct During Coronavirus Pandemic

August 17, 2020

Market Watch 63 issued in May 2020 has been widely discussed given it reflects the concerns of many Compliance Officers when in a Working From Home (WFH) environment. As firms prepare to get their front office staff back in the office Compliance Officers and Senior Managers are discussing how effective they were in monitoring their firms interaction with the markets and The FCA have been keen to point out this isn’t just aimed at broker dealers but issuers, advisors and in fact anyone handling inside information and encouraging all participants “to act in a manner that supports the integrity and orderly functioning of the financial markets”.

The newsletter defines 5 key points of focus:

  1. ensuring inside information continues to be appropriately identified and handled correctly by all persons involved and is not misused for insider dealing
  2. ensuring inside information is appropriately disclosed by issuers
  3. maintaining robust market surveillance and suspicious transaction and order reporting (STORs) by market participants
  4. meeting the transparency and short position covering requirements under the Short Selling Regulation (SSR)
  5. identifying and managing conflicts of interest by market participants that may arise around capital raising events

A key focus in the newsletter is around the control of inside information and the requirement to ensure that firms can continue to demonstrate ongoing compliance with the Market Abuse Regulations. The FCA is concerned that the risk of market manipulation has increased during the COVID-19 pandemic with remote working arrangements which have created gaps where potentially abusive behaviours may go undetected. Along with this, issuers have found that they are having to reassess the performance or strategy of their companies leading to an increased amount of inside information which needs to be appropriately controlled.

At the same time firms have found it increasingly difficult to assert proper control of and regulation over any such abusive behaviours. The contact between regulators and firms has itself also been disrupted leading to a sense of lack of normal control over our markets. Both firms and regulators must be feeling a small amount of relief as the City prepares to come slowly back in to the offices but looking back both the regulator and firms will be looking at what extra controls they should consider putting in place if WFH is to continue in any way for these type of market participants.

How can Effecta help?

Should you wish to discuss how changes to your working environment has impacted your firm or if you would like a review of your current systems and controls as they relate to market abuse please contact us.