Global financial regulators are focused on combating market abuse, which is pressing compliance professionals to ensure they have the right trade surveillance capabilities and have tailored these systems properly, according to Eventus.
Eventus just launched a global report titled “A Guide for Compliance Leaders: Top Market Surveillance Priorities for Regulators” that analyzes the priorities of global regulators to help guide compliance leaders as they seek to combat market abuse, protect companies and employees and reduce the risk of penalties and fines.
Compliance teams in broker-dealers, trading firms and intermediaries must remain vigilant and responsive to these regulators’ priorities to stay ahead of the risk, according to the report.
“Our examination of the strategic plans of leading regulatory bodies across the globe indicate that they are improving their own compliance technology for more proactive enforcement, using industry examinations to identify gaps especially in supervising complex rules, and are asking licensed firms hard questions about their “new” or “innovative” products that might come with heightened market risk,” Eventus said in the report.
For instance, regulators that have announced initiatives to boost their own surveillance capabilities with better datasets and data analytics include the Securities and Exchange Commission (SEC) in the United States, the United Kingdom’s Financial Conduct Authority (FCA), the Monetary Authority of Singapore (MAS), and the Hong Kong Securities and Futures Commission (SFC).
According to Eventus, the FCA promised “assertive action against market abuse”, meanwhile the European Securities and Markets Authority (ESMA) said its annual “focus will notably be on enhanced supervision and cooperation regarding market abuse.”
This year, MAS plans for more engagement with brokers and the SFC is rolling out a new Broker-to-Client Assigned Number (BCAN) to enhance its market surveillance, the report noted.
According to Eventus, broker-dealers’ compliance teams face this daunting challenge across major jurisdictions.
In the United States, the SEC and FINRA said they examined nearly half of the 3,500 registered broker-dealers there last year, a method these regulators use to gather information about regulatory gaps and potential future investigations and enforcement.
These examinations discovered gaps in trade surveillance, including a lack of written supervisory procedures (WSPs) and too many alert thresholds “not reasonably designed” for the customer type or asset class, the report said.
They also identified best practices such as continued attention to well-known manipulative trading schemes. Meanwhile, US regulators are devoting more attention to technical regulatory requirements like Regulation SHO, a multifaceted rule about short-selling, the report said.
This paper summarizes the regulatory priorities of several global regulators based on their own strategic plans and public guidance.
Then, the paper offers recommendations for compliance leaders as they work to identify regulatory gaps, advance their monitoring capabilities to follow complex requirements, and move fast to find the risk before the regulators do.
Download the report here.
