In a speech at the British Bankers’ Association’s (“BBA”) Market Abuse Conference on the 7th of October, Patrick Spens, the FCA’s Head of Market Monitoring, addressed the regulator’s concern with, and ongoing pursuit of, market abuse.
Mr Spens outlined that market abuse remains a high priority for the FCA as it is integral to maintaining a clean and fair market. One of the FCA’s three main objectives is to ‘protect and enhance the integrity of the UK financial system’; the pursuit of market abuse is directly attributable to this objective. Throughout his speech Mr Spens addressed four key measures, which the FCA has identified as crucial towards achieving its goal:
- Transaction Reporting: It is crucial that firms report transactions correctly and in line with FCA rules. The FCA’s recent £4.7 fine on Deutsche Bank serves as an example of the regulator’s intolerance of incorrect reporting. Deutsche Bank is now in the process of resubmitting 29.5 million transactions – there will be significant changes in the transaction reporting space with the implementation of MiFIR. The details of these changes are yet to be determined.
- Suspicious Transactions Reports (“STR”) Regime: STRs should be submitted for all financial instruments, which are defined under legislation. Firms are in a unique position in respect to their proximity to their clients. This means that they have the ability to perform the most effective market surveillance and are, as Mr Spens calls them, the first line of defense. Mr Spens warns that the FCA will continue to take action and pursue individuals and firms who fall short of their obligations to submit an STR.
- Surveillance visit: The FCA performs its own surveillance of the markets, in order to enhance the intelligence received from STRs and other sources. The surveillance visits conducted by the FCA form part of their STR and platform supervision, and are an important source of intelligence.
- In-House proprietary technology: The FCA’s in-house system called “Zen” has the ability to ingest large amounts of data and analyse trading patterns in order to strengthen market abuse cases. Zen is an invaluable tool in tackling financial crime and forms crucial part in the regulator’s market surveillance.
In his speech Mr Spens outlined that tackling market abuse ‘requires dedicated and vigilant actions from all market participants and not just the FCA’. Therefore, firms should ensure that they have adequate systems and controls in place for detecting suspicious transactions.
In order to view the full speech by Patrick Spens please follow this link.
Should you require any further advice or information on Market Abuse, Cleveland & Co, your external in-house counsel, are here to help.