Inside Information Under the Spotlight in FCA’s Latest Market Watch

The latest FCA newsletter, Market Watch 83, shines a spotlight on corporate finance firms and the handling of inside information. The regulator is calling for tighter controls, clearer policies, and stronger monitoring. What do firms need to look out for?

The FCA has just released its Market Watch 83, Reinforcing the importance of effective controls for managing inside information in corporate finance firms. As corporate finance firms often possess inside information, it is important that they maintain strict controls to ensure this information is not improperly disseminated. The FCA focuses in its document on proper market sounding procedures, best practice and personal account dealing policies.

This is an important reminder for corporate finance firms to ensure that they are following the correct procedures when performing market soundings, including following a script to ensure that all recipients receive the same level of information.

Market Watch 83 also provides a valuable reminder to all firms about the continuing importance of the Market Abuse Regulation to the FCA. This includes having effective information barriers and formal policies and procedures and monitoring that the procedures are followed. Informal or verbal policies and procedures are not considered sufficient by the FCA as they often lead to weak or inconsistent practices within a firm. Having clearly defined expectations serves to protect the firm and its employees from unintentional improper conduct. This is strengthened when firms have strong monitoring procedures as they can prove a history of conduct. Whenever breaches are identified, they should be investigated and a record of this maintained by Compliance.

Key takeaways

1. Market soundings: Some firms contacted too many investors, shared inconsistent details, or involved brokers without approval. Strong governance, clear controls, and consistent use of scripts are essential.
2. Smaller firms: Smaller firms were more exposed due to informal policies, limited compliance independence, and blurred team boundaries. Good practice includes documented procedures and independent oversight.
3. Personal Account Dealing: Many firms lacked proper controls over staff trading, leading to breaches. Effective policies help manage conflicts, protect confidential data, and prevent market abuse.

Market Watch 83 is the FCA’s latest publication to focus on an aspect of market abuse. The regulator views market abuse as a key obstacle to the UK’s attractiveness as a global financial centre, hence the enhanced scrutiny in this area. All firms should ensure they have implemented and maintain effective market abuse policies and procedures.

How Thistle Initiatives can help

Thistle Initiatives can support you with:

• Designing policies and procedures to combat market abuse within your corporate finance firm;
• Designing a monitoring programme and providing a third line of defence;
• Auditing existing policies and procedures to identify areas for improvement;
• Investigating any breaches of policy to identify potential misconduct.

Get in touch at info@thistleinitiatives.co.uk or call 020 7436 0630 to speak with our team.

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