On 27 September 2016, the FCA published issue no. 51 of its regular Market Watch newsletter, in which it addressed a number of MAR-related issues, including: market abuse risk as managed by information barriers and wall-crossing procedures and insider lists.
The newsletter comments on a review of a sample of firms that are registered market makers in small and mid-cap equities.
In relation to market abuse risk as managed by information barriers, the newsletter notes that where physical segregation of teams is not possible, extra steps should be taken to ensure that information barriers are properly managed and maintained. These can include: specific training for staff with access to inside information, and ensuring that compliance representatives are properly integrated with front line operations to improve surveillance capabilities and information management.
The review found the level of documented wall-crossing procedures to be generally poor across the firms reviewed and noted this was of concern in view of the provisions for wall-crossed and non-wall-crossed market soundings in Article 11 of MAR.
The newsletter concludes that the most effective approach in this area is that followed by those firms that use the compliance team as "gatekeepers" in all wall-crossings, deciding whether a wall-crossing is necessary, who is the correct person to wall-cross and the most appropriate time to do this. This encourages a consistent approach and reduces the risks of inadvertent wall-crossing.
In relation to insider lists, the review came across several examples where details recorded on insider lists were either inaccurate or missing entirely. The FCA encourages firms to consider the "need to know principle" when deciding which individuals should be wall-crossed and so included on the insider list, so that inside information is only disclosed where it is information in the "normal exercise of an employment, a profession or duties" (see Article 10.1 of MAR (unlawful disclosure of inside information)).
The newsletter can be accessed here:
https://www.fca.org.uk/sites/default/files/marketwatch-51.pdf
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