The Pressure is On: FCA Releases Questionnaire to Asset Managers .

The FCA has taken a critical step in enforcing MAR within the asset management and hedge fund industry by sending a questionnaire examining risk management procedures in reporting and preventing manipulative behavior.

The Pressure is On: FCA Releases Questionnaire to Asset Managers

By Taras Chaban / Global Head of Buy-side Solutions, Nasdaq

The Financial Conduct Authority (FCA), has taken an important step in enforcing the Market Abuse Regulation (MAR) within the asset management and hedge fund industry. Global regulators, like the FCA and the SEC, have consistently put the pressure on the sell-side, but focus is quickly shifting to the buy-side, and firms need to be adequately prepared for heightened scrutiny from regulatory bodies.

InvestmentWeek reports that asset managers are being contacted by the FCA with a questionnaire examining their risk management procedures in reporting and preventing manipulative behaviors. This action reinforces the need for buy-side firms to deploy  automated systems and controls in the monitoring and detection of market abuse and manipulative behaviors such as insider trading, front-running, and window dressing.

According to InvestmentWeek, the questionnaire includes questions such as:

  • Do you require order and trade rationales to be documented before being submitted?
  • Do you undertake surveillance (automated or manual), outside of front office, of your trading activities for market abuse?
  • Do you have any communications surveillance in place (e.g. key word monitoring, email monitoring, phone monitoring)?

It is critical for buy-side compliance teams to ensure their firm is meeting regulatory requirements, and that they are prepared to respond to the FCA’s questionnaire. Without proper controls, these firms face potentially severe fines and penalties, but they may suffer irreversible damage to their reputation. Manually keeping track of trades in excel spreadsheets will no longer suffice, and firms need to consider implementation of an automated compliance system to safeguard their firm against manipulative behaviors and to confidently guarantee that all global regulatory requirements are being met.  An automated compliance system can be seen as a competitive differentiator by helping firms to attract and retain clients, and can reduce costs by decreasing the headcount needed to investigate alerts.

Nasdaq Buy-side Compliance is designed to help ensure that the asset management industry is both protected from and proactively addressing market abuse, while also helping them to be prepared for the upcoming FCA questionnaire, as well as future regulatory probes.

Using a behavioral profiling algorithm to detect rogue trading patterns,   which computes behavioral heatscore, the system ranks specific actions, telling compliance which cases warrant investigation, drastically reducing false positives and saving valuable time. Nasdaq Buy-side Compliance produces comprehensive reports that compliance can show to regulators, ensuring that all requirements are being met. These types of capabilities will help asset managers pave the way to compliance. To learn more about the considerations your firm should be making when selecting an automated compliance system, you can download our buyer’s guide to buy-side compliance systems.

To learn more about Nasdaq Buy-side Compliance, you can visit our website or download our factsheet.

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