Why It Is Important
Market Abuse Regulation (MAR) was introduced in 2016 and it requires financial services firms to detect potential market abuse across a broad range of markets and financial instruments. Financial services firms must make sure they have effective trade surveillance arrangements, systems, and procedures in place to protect themselves, their clients, and counterparties from potential market abuse. Failure to properly implement the regulation could result in regulatory fines and reputational damage.
What Your Firm Needs to Consider
Market Abuse Regulation (MAR) covers the offences of insider dealing, unlawful disclosure of inside information, and market manipulation. Financial services firms that arrange or execute transactions in financial instruments are required by Article 16(2) of MAR to establish and maintain effective arrangements, systems, and procedures to detect and report potential market abuse.
The regulation also sets out:
- A framework for legitimate disclosures of inside information during market soundings
- Exemptions in buy-back programs and stabilization measures
- Accepted market practices
- Acceptable disclosures and conditions for delayed disclosures
- Requirements for maintaining an insider list and handling managers’ transactions
- Requirements for the detection and reporting of suspicious transaction and order reports (STORs)
- Requirements for persons providing investment recommendations and disclosure of conflicts of interest
Regulators are focused on this area as demonstrated by a recent £12.6m fine in the UK for failures relating to the detection of market abuse. Therefore, it is prudent for regulated financial services firms to review and test their surveillance arrangements to consider whether they are compliant.
More broadly, we believe that financial services firms should consider applying a regression testing approach to regulatory compliance. Core compliance of existing arrangements should be tested via lookbacks on previous change implementation. Furthermore, financial services firms should use the seemingly unending flow of regulatory reform/refits as an opportunity to provide effective implementation and therefore broader regulatory compliance.
How FORVIS Can Help
FORVIS advisors can assist you with the analysis, design, and implementation of changes to your regulated activities. Our services range from assurance and advice on specific regulations to full management and assistance with implementation of your operating model changes. Our professionals are a global community of advisors driven by a shared passion to serve premier companies on financial services industry-leading projects, and we possess the industry knowledge and experience to help your organization achieve its business goals.
If you have questions or need assistance, please reach out to a professional at FORVIS or submit the Contact Us form below.