“Why Diversity and Inclusion are regulatory issues” 17/03/2021
Nikhil Rathi, the CEO of the FCA delivered a speech at the launch of the HM Treasury Women in Finance Charter Annual Review in March 2021 in which explained that the FCA considers diversity and inclusion within the financial services industry as a regulatory issue.
Mr. Rathi noted that:
the charter, which challenges the financial services industry to do better, is making a positive difference with 62% of signatories having seen an improvement in female representation in senior management;
diversity will be crucial in the FCA’s consideration of vulnerability, particularly as we come out of a pandemic that has disproportionately affected women and people of colour;
the FCA are working with the Prudential Regulation Authority on a joint approach to diversity and inclusion for all financial services firms; and
the FCA will increasingly be asking tough questions firms about representation across grades and whether their culture is open and inclusive and provides a safe space for colleagues at all levels of the organisation.
As we are all aware, diversity and inclusion as been the most visible social political issue over the past 24 months. The FCA have taken the opportunity to demonstrate their commitment to tackling the issue and have outlined how they plan to positively influence the industry.
Going forward the FCA will be seeking to hold Firm’s lacking in their approach to diversity and inclusion to account. As a result, it is important that Firm’s address their procedures to ensure they support diversity and inclusion and should be prepared to answer questions, with supporting evidence, confirming their inclusive culture.
More detail on the speech can be found at https://www.fca.org.uk/news/speeches/why-diversity-and-inclusion-are-regulatory-issues.
“Locking down Market Abuse” 08/03/2021
Mark Steward, the Executive Director of Enforcement and Market Oversight, delivered a speech at the Expert Forum: Market Abuse 2021 where he discussed the current environment in respect of Market Abuse and actions the FCA are taking.
Mr. Steward noted that:
Despite the coronavirus pandemic and Brexit, the FCA saw an overall increase of 34% in transactions and transaction reports in 2020;
Surveillance and investigation work by the FCA has reduced trading by certain actors whose trading prompted high numbers of suspicious transaction and order reports.
an increase in the FCA’s proactive market monitoring and the introduction of some new initiatives, notably a new approach to short selling reporting and
the introduction of a new market cleanliness measure, the Potentially Anomalous Trading Ratio.
The FCA introduced a new market cleanliness measure, the Potentially Anomalous Trading Ratio (PATR) The PATR focuses on the underlying trading behaviour around specified price sensitive announcements and assesses whether the behaviour can be deemed anomalous as opposed to looking purely at trading volume fluctuations or price changes ahead of unexpected price sensitive announcements.
On a more general note Mr. Steward explained that the FCA’s approach to tackling market abuse ensures the mechanisms for efficient and reliable value and price, for genuine supply and demand in order that capital markets under the FCA’s supervision offer the highest levels of protection for global capital. He confirmed the FCA will continue to look for measures that are meaningful and allow them to assess trends over time.
In terms of enforcement action taken by the FCA in key market abuse cases against individuals and firms:
the FCA publicly censured Redcentric and secured a compensation agreement for members who were impacted by false and misleading statements about the company’s financial position. The FCA also brought criminal charges arising from the same circumstances against 3 former directors alleging offences under the Companies Act, Theft Act and Fraud Act. Those charges await trial.
the FCA issued public censure proceedings against Carillion following its £7 billion collapse, alleging market abuse by the company. The FCA also issued regulatory proceedings against 3 former directors of the company alleging market abuse in relation to false statements and failures to take reasonable steps to ensure announcements were not misleading.
the FCA completed market abuse proceedings against former hedge fund manager, Corrado Abbatista, and fined him £100,000 for placing large misleading orders for instruments he had no intention of trading whilst at the same time placing smaller genuine orders on the opposite side of the order book. The FCA found he was guilty of market manipulation by falsely representing an intention to buy or sell when his true intention was different, distorting the appearance of genuine supply and demand, and illegally benefiting his trading position.
In conclusion, the FCA continues to allocate significant resources to fight Market Abuse and will use the full range of sanctions available against firms and individuals to deter improper actors. The FCA continue to develop their approach to identifying market abuse. All Firms should ensure that their existing Anti-Market Abuse policies and procedures are fit for purpose and should adopt a similar “thinking outside the box” approach to the FCA in terms of identifying market abuse. Failure to adequately deal with market conduct has serious consequences for firms and senior management who may face personal sanctions.
More detail on the speech can be found at https://www.fca.org.uk/news/speeches/locking-down-market-abuse.