The news agenda never stands still, and the regulatory landscape constantly shifts in its wake – the introduction of new and updated regulations is frequently event-driven, with legislation enacted in response to bad news, such as economic crises, geopolitical disruption, and large-scale financial crime.
This creates challenges for compliance officers, who must be able to identify any developments, such as rule amendments, that apply to or could impact the business, update policies and procedures, and keep employees informed and educated.
They also need to stay on top of breaking news, including economic announcements and company updates, that could potentially expose the firm to market abuse, such as insider trading. This involves wading through and making sense of a rising tide of data from disparate sources, in varying formats – a time-consuming task that risks key information falling through the cracks.
Global newsfeeds can help compliance teams monitor for, manage, and take necessary action on relevant news to ensure the firms they protect, and their employees, remain compliant and don’t fall foul of company policies – or the regulators. Crucially, it can maximize their ability to detect insider trading. How?
GLOBAL NEWSFEEDS: YOUR ALLY AGAINST INSIDER TRADING
Consider the following scenario. In January 2022, the United Arab Emirates (UAE) became the first country to implement a shorter national working week of four and a half days. Government employees now work from Monday (rather than Sunday) to Friday lunchtime (instead of Thursday evening), aligning more closely with the five-day week that is standard in many countries globally. With the country’s financial sector now trading on the same days as other major financial centers, the UAE expects to improve its economic competitiveness, as well as workers’ social wellbeing.
Although the working week is only four hours shorter than it was, this could pose problems for companies based in the Emirates. If a problem – such as an employee trading a competitor’s shares before an announcement after receiving privileged information – were to arise on a Friday afternoon, the compliance team would only find out on the following Monday morning. They would then have to scramble to get up to speed on the issue, which might impact multiple jurisdictions, and take action to prevent or minimize any harm.
The delay of nearly three days increases the firm’s exposure to risks, such as market abuse, with any suspicion of insider trading leading to heightened regulatory scrutiny and ultimately, hefty fines and (international) reputational damage if the rules have been breached.
This situation could be avoided if compliance officers were alerted prior to the upcoming announcement via a global newsfeed integrated into their compliance automation, allowing them to ensure the necessary monitoring and control tools were in place to prevent any market abuse.
THE IMPORTANCE OF COMPLIANCE AUTOMATION
Integrating global newsfeeds into the firm’s compliance automation relieves the compliance team of manually searching for relevant news, freeing officers up to focus on other high-priority activities.
Compliance automation can expand the compliance team’s capacity by providing a holistic view of data, integrating proprietary data with third-party news. Configurable data-visualization allows compliance teams to review the information how they need to see it.
The STAR platform provides access to over 400,000 news stories from 8,500 sources every day, each of which is assigned a daily impact score to identify its significance. Powerful filtering and indexing systems mean only news items with the most relevance to the business is highlighted. This enables the compliance team to pinpoint trades made prior to significant market events, with a system that cross-references news events against employee trading data.
Discover how you can detect illegal insider trading activity and resolve it fast by leveraging news data to investigate questionable trades and future-ready compliance tools to monitor and protect your business. Download Star’s best practices guide to detecting insider trading here.