With increased scrutiny and market abuse regulations growing every year, are issuers of securities at publicly traded companies and professional service firms at increased risk?
In a recent IFA magazine article, Terry Dawson, StarCompliance’s Managing Director of Corporate Markets takes a look at market abuse legislation and the role compliance can play to ensure the integrity of investors and help issuers protect themselves and their employees.
FINANCIAL FIRMS VS. PROFESSIONAL SERVICE FIRMS
Financial firms have long operated with more prescriptive regulatory measures, and so monitoring and tracking employee trading activity has become second nature. Publicly traded and professional service firms, on the other hand, are not explicitly required to track employee trading activity, and typically do not operate at this same standard. But with regulators stepping up their scrutiny, it’s time for issuers and professional service firms to rethink and more closely resemble financial firms’ approach to employees’ investment activities.
Today, regulations say that issuers and advisors must have ‘sufficient’ technical and organizational measures in place to guard against market abuse, but are regular training and signed promises from employees that they won’t break the rules enough? In both the UK and the US, recent assertions and amendments to market abuse laws have been made to enhance investor protection and limit potential abuse. Regulators are also getting more effective at spotting incidents of abuse, and with new European legislation that could increase whistleblowing, many firms need to step up their compliance processes to avoid fines and other enforcements from the lack of oversight.
INVESTING IN COMPLIANCE TO INCREASE MARKET INTEGRITY AND PROTECT INVESTORS
From years of operating at increased regulatory standards, financial firms have built compliance into their culture and have invested in a multitude of compliance solutions to protect both their business and their employees from a variety of risks. If corporate markets want to do the same, investing in compliance will defend them from instances of market abuse and regulatory changes in the future.
Terry recently had a sit down with corporate compliance lawyer Jonathan Armstrong, from Cordery Compliance. Corporations & Market Abuse: Why It Needs to be a Priority in 2023 is a must-watch 20-minute webcast for non-financial firms who only consider company stock trades by senior leadership as a market abuse threat. Jonathan shares the market abuse trends he sees and the best practices his forward-thinking clients are putting in place to protect their businesses and reputations.
Corporations worldwide can learn a lot from their financial firm counterparts. By implementing a more bolstered approach to compliance, issuers and professional services firms can better protect investors and save themselves a lot of trouble.