The FCA has published a speech by its FCA Market Oversight Director, Julia Hoggett, on market abuse during the COVID-19 pandemic. Companies and their advisors need to be alert to the sort of information that is likely to drive their valuation and to raise a potentially wider range of issues within their disclosure committees.
Key points in the speech include:
The FCA’s focus on markets remaining open is driven by the fundamental role they play in supporting the economy – by enabling risk to be priced and managed, but equally enabling institutions to raise capital when needed. The fundamental need for institutions to ensure that they have appropriate controls over inside information and effective information barriers is even more critical during the pandemic.
Surveillance alert triage and Suspicious Transaction and Order Reports (STORs) in volatile markets
The dramatic increase in trading activity and volatility, particularly at the start of the crisis, has led to a surge in alert volumes. The range of market abuse offences being committed continues to change and therefore the way they are surveyed must also change.
Firms should continue to escalate and report instances of potentially suspicious activity by considering whether the bar of ‘reasonable of suspicion’ has been met. Exceptional market conditions may have an impact on what activity is judged to constitute unusual or anomalous. However, the fundamental process should be the same: firms should assess the evidence, apply context and make informed decisions. The volume of alerts does not justify firms submitting poor quality STORs.
The FCA asks firms with a significant STOR backlog to bring this to the attention of its STOR Supervision team.
Surveillance and new ways of working
Despite the significant increase in home-working, the regulatory obligations have not changed: the “how” may be changing, but the “what” remains the same. The FCA emphasizes the importance of good culture within firms. Compliance teams should consider how to ensure that staff are in no doubt about the standards expected of them.
The “how” may be changing, but the “what” remains the same.