The UK’s financial sector regulator, the Financial Conduct Authority (FCA) last month published its business plan for 2019/20. The plan provides an overview of the FCA’s key priorities for the year ahead and is an important resource for financial sector firms as they look to shore up their compliance policies, procedures and systems.
One of the key priorities flagged in the report is around compliance with the Market Abuse Regulation (MAR), which the FCA sees as central to its regulatory activities in the wholesale financial markets. In the year ahead, the FCA is looking to continue its work with issuers to increase their knowledge of MAR and ensure that ‘their systems and controls match the market abuse risks they and their investors face’.
More broadly, the FCA has signalled its intention to focus on a number of areas in firms’ control frameworks including the control of inside information within M&A businesses and corporate broking functions. The regulator also states that from a supervisory engagement perspective it will concentrate on the ability of firms to detect and report suspected market abuse, with a focus on the surveillance of fixed income markets.
According to the plan, the FCA is in the process of developing a new monitoring and detection tool that will focus on delayed disclosure and misleading statements by issuers as well as secondary market behaviour, such as cross-market manipulation, abuse in fixed income markets and equity insider dealing. Significantly, the regulator unequivocally states that it will carry out enforcement investigations as appropriate.
The FCA is therefore not only increasing its focus on MAR compliance, but also enhancing its technical capabilities to do so. Financial sector firms need to ensure their own market surveillance capabilities keep pace so they are able to detect and report suspected instances of market abuse rapidly and comprehensively.
With the FCA extending the Senior Managers Certification Regime to all regulated firms, ensuring MAR compliance should now be a priority for all senior managers in financial sector firms and not just their compliance teams. In a world where accountability is spread more widely across the firm, it is in everyone’s interests to work together to ensure the very best compliance processes and systems are in place.
There’s no doubt that the FCA is ramping up pressure on firms. However, the market surveillance tools organizations require are already on the market, and by taking them as a managed service firms can rapidly and cost-effectively integrate them into their businesses. The FCA’s plan demands action, and firms should respond as a priority.
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