The UK’s Financial Conduct Authority (FCA) appears to be ramping up its efforts around the enforcement of the EU Market Abuse Regulation (MAR) in the asset management industry, a move that will put already beleaguered compliance teams under even more pressure. According to reports, the FCA has sent asset managers a questionnaire to gain insight into their market surveillance, risk management and reporting procedures around market abuse.
MAR came into force in July 2016, bringing with it new market surveillance and reporting obligations for financial sector firms. Through MAR, the EU hopes to reduce instances of market abuse, particularly insider trading, and boost confidence in its financial markets. The FCA’s new focus on asset managers shows that the regulator is taking a holistic approach to market abuse oversight, putting the buy-side under levels of scrutiny that were previously restricted to sell-side firms.
The FCA’s questionnaire provides asset managers insight into the areas the regulator will be cracking down on. Some of the questions, as reported in Investment Week, include:
- Do you require order and trade rationales to be documented before being submitted?
- Do you undertake surveillance (automated or manual), outside of front office, of your trading activities for market abuse?
- Do you have any communications surveillance in place (e.g. Bloomberg key word monitoring, email monitoring, phone monitoring)?
Based on these questions, compliance teams at buy-side firms need to focus on best execution and, significantly, ensure they have robust surveillance capabilities in place. This is a challenge for buy-side firms as they have previously been able to outsource market surveillance to their brokers. As a result, many firms face a stark choice: invest in expensive automated market surveillance systems or use time-consuming and error-prone manual surveillance processes.
Fortunately, there is a third way. By sourcing market surveillance platforms firms can benefit from the accuracy and coverage of feature-rich automated capabilities, without the need for a large upfront capital expense. A further benefit of this approach is that managed surveillance solutions of this sort can be implemented rapidly and with minimal disruption to the business, enabling firms to achieve compliance with ease.
Given that for breaches of MAR the FCA can impose unlimited fines, order injunctions, or prohibit regulated firms or approved persons, it is critical firms choose the right compliance approach – and that it is put in place as soon as possible.
Contact us to receive more information about RegFocus® MAR, our award winning solution which handles the many complex challenges of Market Abuse, including the Market Abuse Regulation (MAR) and MiFID II compliance.
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.
- RIMES Appoints Andrew Barnett as New Global Head of Product Strategy
- EU Announces Delay to BMR for Critical and Third-Country Benchmarks
- Three Key Compliance Challenges for Asset Managers
- FCA Questions Effectiveness of Firms’ Market Surveillance Capabilities
- Financial Sector Firms Needs More Data Than Ever – Here’s How RIMES Can Help