The COVID-19 pandemic has gifted us the opportunity and urgency to embrace ‘work from anywhere’ culture and technology. How do firms ensure they stay compliant in 2020?
The FCA’s Director of Market Oversight, Julia Hogett headlined a city conference this week, speaking to an esteemed group of experts about market abuse in this time of coronavirus. Nothing new there, except a global pandemic and a conference held virtually. The way we work and connect has changed drastically in 2020. Hogett discussed the challenges faced by the regulator over the past 7 months, while clearly laying out the FCA’s expectations for Firm compliance in this necessary age of remote working. To cut to the chase, the FCA expects that remote working should be governed and monitored by Firms in the same way as office-based work to ensure compliance with regulatory requirements.
Hoggett praised the mammoth effort made by firms, and by the regulator to keep the markets open during the pandemic, a necessity she stated, to support the UK economy. However, Hoggett emphasised that as the regulator, it is the FCA’s role to ensure the markets stay clean, and laid out the risks that the pandemic has presented, highlighting three core challenges faced by firms: the scale of market activity that has taken place over the last 7 months; the challenge of surveillance during volatile markets; and the challenges of monitoring the vast range of communication channels used in remote working, and the importance of implementing an effective compliance culture to manage those risks.
Hogett stressed the need for “effective surveillance at all times” to ensure that the UK’s markets remain open, trusted and respected by all.
Stating: “We have all had to find, and have found, many new ways of working in the last few months that we previously did not think possible. We will also have to navigate huge amounts of change over the coming months, depending on the path of the virus, as we work through Return of Office models that will no doubt include both hybrid ways of working and indeed, over time, potentially long-term changes to the way we all work. This also requires firms to adjust the way in which they think of the range of surveillance tools available to them.
It is essential in changing times that firms identify the risks associated with the new environment in which we are all operating.
We expect firms to have updated their policies, refreshed their training and put in place rigorous oversight reflecting the new environment – particularly regarding the risk of use of privately owned devices. These policies should be demonstrable to us and to your audit teams. It should go without saying that policies should prevent the use of privately owned devices for relevant activities where recording is not possible. New communication mechanisms, before they are used, should have controls in place where required and their use be approved by firm management. The regulatory obligations have not changed, the how may be changing, but the what remains the same.”
What was also made clear was the necessity to manage information with discretion and appropriate controls to avoid inadvertent tipping off during an FCA review or investigation.
“In a recent Market Watch we discussed how inappropriate handling of information requirements issued by the FCA can hinder, or even compromise, our preliminary reviews of, and investigations into, suspected market abuse – particularly where subjects are tipped off due to the inappropriate handling of an information requirement by a firm.
Whilst it is fair to say many firms carefully handle our requests and prove very helpful to our enquiries – this risk crystallised in one of our cases not long ago – where the mishandling of one of our confidential information requests led to a suspect fleeing the country. In that case, unknown to us, the content of our request was shared with a manager of the firm’s deal team, who then decided to question an individual who had accessed inside information without a ‘need to know’. The individual was the suspect in our investigation and upon being challenged, resigned from the firm and left the country, severely hindering our ability to take action.
Investigating and prosecuting market abuse is difficult, and events such as these make it even more challenging – ultimately harming our markets for everyone”
Hogett left her keynote on a positive note, commending Firms that had moved swiftly with the times and implemented strong compliance policy, utilising appropriate compliance technology, providing clear reporting, and continuing employee training.
“Firms dedicating resources and energy to good reporting actively contribute to the system being safer for everyone.”
To find out how our powerful Fingerprint Supervision technology can support your firm to meet your regulatory responsibilities, speak to our Commercial Director, Sean Morgan at firstname.lastname@example.org or call on +44 (0)20 3011 4145 or +44 (0)7825 926 576