EU Market Abuse Regulation – have you reassessed your risks and prioritised how to tackle these?
07 August 2017
It’s been just over a year since the EU Market Abuse Regulation went live but today market abuse is still a key focus area for our clients and we are continuing to see a lot of activity in this space as clients look to reassess and prioritise the risks that their businesses face.
What are the key challenges firms are facing?
Whilst every firm has a different focus and approach to conducting a market abuse risk assessment a few of the key challenges we are seeing are:
- Regulatory fragmentation - Different regulators across the EU have different objectives, focus and priorities. For our clients that have a wider reach globally we are seeing challenges around prioritisation in order to ensure they are meeting local regulatory expectations. In addition in locations where market abuse has not previously been seen as important there is also a need to build awareness and knowledge.
- Industry standardisation – MAR is not the only market conduct framework that firms are currently having to comply with as there are a number of emerging market standards and codes, such as the FX Global Code of Conduct and FMSB papers, that require formal adherence. Whilst there is general alignment across the regulation and codes firms need to ensure any changes they implement address all current guidance.
- Coverage of existing surveillance - Whilst technology is improving there are still some areas such as voice surveillance that are immature and untested. This has created difficulties for firms to ensure they have appropriate coverage for all their risks.
What are firms doing about this?
We have seen firms tackle their Market Abuse risk assessment in a number of ways. Some are addressing it as a broad, global exercise and aiming to incorporate risks from both MAR and other market codes to achieve the highest standards. However, many firms are struggling with this approach, both from a capacity perspective and also due to constraints based on other regulatory priorities.
We are also seeing more interest from non-UK firms who are looking to ensure compliance with MAR and for whom this area of regulation is relatively new, including firms in the EU and also those based in Asia and Africa.
In the surveillance space, many firms are still looking to build out their existing coverage; either through new vendors; extending current tools or conducting manual testing. Often the firms achieving the most success are those who are adopting a blended approach by augmenting existing tools and introducing new tests to address any emerging risks.
So what does this mean for you?
Whilst many firms may have completed a risk assessment last July, a lot can change in a year so firms should look to update and validate any existing risk assessments. It may be best to start from scratch to ensure risks have been considered across all relevant businesses, asset classes and regions. Most importantly a risk assessment shouldn’t be seen as a ‘point in time’ exercise but should be an evolving document that is reviewed regularly.
We’ve developed a series of guides assessing the impact of MAR on Surveillance, Suspicious Transaction and Order Reporting, Investment Recommendations and Inside Information and the key areas you should be considering to address these risks. For a copy of these please get in touch with Ruk Permal or Anne-Marie Edmonds.