In the latest (August 2019) edition of the Financial Conduct Authority’s (FCA) Market Watch newsletter, the Regulator focused on the important topic of insider list management. In the newsletter, the FCA reiterates the legal consequences of allowing widespread and unchallenged access to inside information by people who do not need the data to do their job, which can result in the unlawful disclosure of inside information as set out in Article 10 (1) of the Market Abuse Regulation (MAR).
This is a topic that the FCA has covered on a number of occasions and which seems to be an increasing focus for the Regulator. In February of this year, for example, it highlighted the need for firms to be able to identify conduct risks to ensure they have effective market abuse controls in place. In the same speech, the Regulator stressed the equal importance of systems and controls to manage how inside information is communicated both inside and outside the firm.
This month’s Market Watch suggests that some firms are falling short of these requirements. There were several areas in particular the FCA flagged for attention:
- Insider lists often omit names of people with access to inside information. In other cases, individuals not on these lists have been able to access the information.
- Too many support staff can access inside information. In one case, only 12 team members worked on a transaction, yet more than 600 support function employees could access the information.
- In some cases, there’s a failure to restrict access to insider data only to the people who need it for their job. Similarly, some firms enable access to the full inside information, even when the person accessing the information only needs a small part of the data to do their job.
- The regulator also noted that there is often an absence of regular reviews of access rights. This means that access remains in place even when staff change roles or transfer from projects. Similarly, there are cases where the insider lists fail to match the record of who was actually given permission to access the information.
Andrew Barnett, Global Head of Product Strategy at RIMES commented: “The FCA’s summary suggests that many firms have not yet found the right solution to their insider list management needs. This is a concern given the scale of the financial penalties that can be levied by the Regulator for non-compliance with MAR, as well as the significant brand damage that can occur in cases where a company, or individual at a company, is implicated in insider dealing.
“To help solve these challenges rapidly, cost-effectively and with minimal disruption to the business, firms can now leverage managed services that can take the headache out of compliance in this area. By using an expert third-party system provider, such as RIMES, firms can benefit from a single system that enables clearer oversight of their insider list management, as well as other lists such as personal account dealing and watch lists.
With the FCA focusing in on this area and with so much at stake the case for sourcing an expert, third-party master list manager now seems compelling.”
Contact us to receive more information about RegFocus℠ Market Surveillance, our award-winning solution which handles the many complex challenges of market surveillance, including MAR compliance.
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