Market volatility and unprecedented changes to the working environment resulting from the Covid-19 crisis continue to have an impact on market abuse risks and related surveillance operations.
In light of the current situation, the Central Bank of Ireland has written ‘Dear CEO’ letters to each market sector setting out key concerns during the crisis. The CBI’s letter to MiFID Investment Firms focused on the importance of ensuring appropriate customer engagement during the period, but also indicated its position that firm’s need to ensure continuity of the effectiveness of second-line risk and compliance oversight of activities – notwithstanding remote working and other business continuity measures that may currently be functioning.
In the UK, the Financial Conduct Authority (FCA) has published information for organisations on Covid-19, clarifying that it expects they “should take all reasonable steps to meet the regulatory obligations which are in place to protect their consumers and maintain market integrity” and continue to “take all steps to prevent market abuse risks.” The FCA has suggested that organisations could undertake enhanced monitoring or retrospective reviews.
Other regulators, such as the Financial Crimes Enforcement Network (FinCEN), have received reports regarding suspected Covid-19-related insider trading and are advising financial institutions to remain alert about malicious or fraudulent transactions similar to those that occur in the wake of natural disasters. There is currently limited published regulatory guidance to organisations to help with decision-making surrounding operational risks and compliance with market abuse obligations; however, the FCA has highlighted that it continues to take action against market abuse. While information and guidance for organisations develops, we encourage them to assess the risks associated with the current market and new working arrangements, and to consider their measures (tactically and in the medium term) to ensure continuation of their control environment.
Look out for more EY Financial Services Covid-19 implication papers relating to the following Financial Crime and Forensics topics:
You can also review our latest insights and thinking to support you in leading through these volatile times; don’t hesitate to reach out if you have any questions.