UK financial watchdog wants more surveillance as Brexit threatens surge in market abuse

Pedro Gonçalves
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UK financial watchdog wants more surveillance as Brexit threatens surge in market abuse

Banks and brokers must step up surveillance efforts and report suspicious market transactions and be on the lookout for possible leaks of inside information as Brexit threatens to make the industry patchier, Britain's financial watchdog warns.  

In a speech at The Association for Financial Markets in Europe (AFME), Julia Hoggett, the FCA's director of market oversight, said the leakage of inside information and the conduct of staff members were a focus of the regulator. She was keen to emphasise  that banks and investment funds need to be far more sceptical of employees who access confidential information, from the very top to the cleaning staff.

"We are equally concerned about the risk posed by senior or extremely senior members of staff, who have the most access to information," Hoggett said. "These are the people who are much more likely to meet with senior investors and the people much more likely to be allowed to speak with journalists."

It is not unreasonable to expect that those working in a range of different functions, from cleaning staff to your head of compliance, but also IT support and other functions, should be considered in your firm-wide assessment of the access risks to inside information"

The regulator is trying to crack down on insider dealing, although in the last three years it has prosecuted only one case and that is due to go to a retrial. 

The City watchdog has taken inspiration from an ITV drama and science fiction to warn financial firms of the risks of insider trading by office cleaners.

"Some of you will have seen ITV's recent Wednesday night TV show, Cleaning Up, focusing on an insider dealing ring in London," she said. "While I recognise the producers' need to dramatise events — I am not suggesting office cleaners are going around bugging your offices — it is not unreasonable to expect that those working in a range of different functions, from cleaning staff to your head of compliance, but also IT support and other functions, should be considered in your firm-wide assessment of the access risks to inside information. These members of staff often require broad access — or are able to gain access — to information held across your firm."

Trading on non-public information is also the focus of Cleaning Up, which follows the story of a cleaner in a Canary Wharf office who turns to insider dealing to help to tackle mounting debts.

Brexit presents its own threat to market cleanliness because City corporates may fail to "knit back together" their oversight after Britain's departure.  The bulk of financial rules in Britain come from the European Union.

The rules have been put into UK law and Hoggett said it was important that the quality of controls for tackling market abuses remains robust after Brexit.


"Firms must not have gaps in their oversight, and equally, must remain confident that they can still see the big picture of the behaviours they are facilitating, even across multiple borders," Hoggett said.