Maintaining fair, transparent and orderly markets is a core objective for financial services regulators globally. As financial markets have evolved, regulators try to keep pace, growing their capabilities to detect, and ultimately prosecute, cases of market abuse.
Firms’ own vigilance is key to preventing market abuse. Regulators now expect firms to have a deep understanding of their market abuse risk, and build control frameworks that are both proportionate and effective.
Failure is punished severely. Fines for market abuse offences have increased, but so have fines for control failings, even in cases where no market abuse was discovered. This trend seems set to continue, with regulators growing their capabilities to detect more complex abusive behaviours, such as spoofing, layering and cornering.
Market abuse risk and surveillance
A recurring theme in supervisory work is the market abuse risk assessment. All regulated firms are now expected to have properly assessed, understood and articulated the specific market abuse risks inherent in their business. The market abuse risk assessment is often the first document requested by regulators in a market abuse visit, and failings in the risk assessment may be seen as undermining the entire framework of controls applied.
The risk assessment should shape the controls selected. Policies, procedures and surveillance approaches should all be closely informed by the risk faced. And expectations around surveillance in particular are rising, with only the smallest firms likely to be able to justify the absence of an automated surveillance system.
How we can help with market abuse
Bovill Newgate helps firms to build robust frameworks to control their market abuse risk
- Market abuse risk assessment – our proprietary methodology for conducting market abuse risk assessments has been successfully deployed in over 20 firms, large and small
- Policies and procedures – we can help firms to implement effective policies and procedures to control market abuse risk
- Surveillance support – we assist firms in selecting surveillance systems, calibrating alerts, and designing case management processes
- In depth reviews – we can carry out case reviews where suspicions of market abuse have arisen
- Market abuse managed service – Bovill Newgate offer an innovative surveillance outsourcing solution, in partnership with KRM 22. Read more
