FCA Sets Out Expectations Around Communications Surveillance

COVID-19 may have brought about a new normal of remote and home working, but one thing hasn’t changed as far as the UK’s Financial Conduct Authority (FCA) is concerned: firms must keep up with recording obligations set out in the regulator’s Senior Management Arrangements, Systems and Controls sourcebook. From the FCA’s perspective, telephone and eCommunications records must be maintained, regardless of whether people are working from homes or offices.

Noting that risks from misconduct may be heightened by people working from home, the FCA has made it clear that it expects firms to have a rigorous monitoring regime in place that is proportionate to this increased risk. Significantly, the regulator states that it has already acted against individuals and firms in cases where messaging apps and social media services were used to transmit lists of trading signals and to make investment recommendations without the maintaining auditable records.

According to the FCA, senior managers will be important in helping to establish appropriate culture and governance within firms to ensure that rigorous recording and monitoring is possible for all relevant communications. The risk is that without such controls, firms will be unable to monitor for market abuse effectively nor access the information needed to resolve disputes with clients over transaction terms, should these arise.

Scott Burke, Regulatory Product Manager at RIMES, adds: “Whatever leeway may have been afforded firms as they pivoted towards remote working models is clearly over, and the FCA is returning to business as usual.

“Except that it’s not business as usual. Even before the pandemic, the rise of new eComms channels presented significant challenges to compliance teams and regulators alike. These challenges have been forced front and center by COVID-19, as the decentralization of personnel has stretched existing controls thin.

“While firms are not banned from using certain communications mediums; they must now be able to match the medium with appropriate controls capable of capturing communications, retrieving them, and making them available for audit. On that note, it’s particularly interesting that the FCA has called out trading signals in its communication. This is indicative of both a focus and a precedent that has been set with tying communications back to trading activity.

“RIMES offers an integrated communications and trading surveillance product with SOTERIA, a best-in-class audio and electronic communications surveillance provider. With RIMES’ SOTERIA integration, compliance officers or business managers can easily view communications overlaid with trading activity, while having the confidence that whatever medium their business is using is captured and archived in accordance with regulation.”

Contact us to receive more information about RegFocus℠ Market Surveillance, our award-winning solution which handles the many complex challenges of market surveillance.

The content provided in these articles is intended solely for general information purposes, and is provided with the understanding that the authors and publishers are not herein engaged in rendering regulatory or other professional advice or services. Consequently, any use of this information should be done only in consultation with qualified legal counsel. The information in these articles was posted with reasonable care and attention. However, it is possible that some information in these articles is incomplete, incorrect, or inapplicable to particular circumstances or conditions. We do not accept liability for direct or indirect losses resulting from using, relying or acting upon information in these articles.

Posts by Topics