FCA Issues New Guidance on Personal Account Dealing Compliance

    

The Financial Conduct Authority (FCA) issued Market Watch 62 in October in which the regulator shared its concerns about personal account dealing (PAD), or rather when employees of an authorized firm trade for themselves rather than clients.  

The Market Watch details findings from an FCA study into PAD activity, policies, processes, systems, and controls in a sample of wholesale brokerage firms. The communication also provides the FCA’s observations on transaction reporting, following previous Market Watch newsletters on this subject.  

The main issues the FCA has brought to light around its PAD concerns include: 

  • Employees in front-office roles not understanding their firm’s PAD policies, even after signing attestations acknowledging they do; 
  • Firms and employees thinking ignorance of PAD policies is a reasonable excuse for non-compliance; 
  • Employees — including front-office, compliance and surveillance — deliberately failing to declare external accounts to their employer and/or circumventing requirements; and 
  • Employees trading in breach of the relevant policies including trading in products, such as spread bets on the firm's own shares, when the firm's policy specifically prohibits this. 

The FCA strongly suggests firms have a PAD compliance policy in place that: 

  • Identifies Where PAD creates conflict of interest or market abuse risk and how those risks can be adequately mitigated by front office and compliance staff; 
  • Ensures employees are aware of their compliance obligations and puts the appropriate processes in place to assess their PAD requests or notifications; 
  • Provides real-time reporting on potentially suspicious activity with which the firm can review and if necessary, report to the FCA; and 
  • Mandates senior managers lead by example and act as advocates of strict compliance with the firm’s PAD rules.  

For more information, please visit the FCA’s Market Watch 62 newsletter.  You may also want to learn more about Personal Trading Manager (PTM) from MCO to save time and effort through electronic capture of electronic trades and holdings and the automation of the various checks needed to maintain compliance.