The COVID-19 pandemic has brought new challenges for compliance departments, including a rise in market abuse risk as more staff members work from home. Lawyers in Mayer Brown's Paris office offer insights on market manipulation risk for European banks in a May 13 article in S&P Global's Market Intelligence publication. The article draws on Mayer Brown's recent Legal Update on financial crime compliance and risk management amid the COVID-19 pandemic.
Banks and investment firms are seeing more cases of intentional abuse, says Nicolette Kost de Sèvres, who heads our Compliance, Regulatory and Investigations team in Paris. "Traders," she explains, "could use the lack of tools or hampered verification processes as an excuse to execute trades that would normally be prohibited." Nicolette cites an additional risk of household members trading on overheard insider information.
Joydeep Sengupta, also a member of our Compliance, Regulatory and Investigations team in Paris, raises the issue of compliance departments having a harder time monitoring employees and maintaining formal communication with them outside the office. "Most of our clients record Bloomberg terminals, chats and electronic communication. But when traders are working from home, you can't monitor their personal phone or personal Skype, or what they are telling spouses or friends," he says.
Regulators have granted some timeline extensions during the pandemic, "but they're not giving a free pass" on compliance breaches, Joydeep adds.
For information on other regulatory developments related to the pandemic, please visit our COVID-19 Portal.