Track employee personal relationships and closely associated persons to better monitor conflicts of interest.
Employee personal relationships can lead to significant conflicts of interest. Failure to properly track these potential conflicts can bring about market abuse, and the fines and reputational damage that comes along with it. Understanding the risk of connected persons and personal relationships across the organization allows firms to:
- Minimize the spread of Material Non-Public Information (MNPI)
- Reduce the risk of insider trading
- Encourage a culture of compliance
Tracking employee personal relationships and closely associated persons of the organization can help firms better monitor conflicts of interest, detect potential opportunities for market manipulation and mitigate conduct risk.
MCO’s Connected Persons & Relationships module provides a solution that enables firms to:
- Identify and define both people within the organization and external to the firm who have relationships that could lead to conflicts of interest.
- Declare the affiliations that the other person has to commercial business entities or to government bodies.
- View this information when looking at the MCO conduct risk profile of an organization.
Firms should clearly define the personal relationships that must be declared, disseminate policies and procedures to make sure employees understand their obligations, provide a process for declaring connected persons and relationships and monitor to ensure that employees are fulfilling their obligations. Automated compliance software can streamline the process, tracking adherence and quickly flagging potential areas of risk.
With MyComplianceOffice’s Connected Persons & Relationships software, firms can easily:
- Send pre-clearance forms to users to declare closely associated persons and personal relationships
- Customize standard questionnaires with information specific to the firm
- Pre-clear requests of connected persons and close personal relationships listed
- Search, report and view status of submissions
Integrated compliance for a holistic view of conduct risk
Understanding the actual, perceived and potential risk stemming from connected persons and close personal relationships is just one part of an employee’s conduct risk profile. MCO’s integrated software solution alerts compliance if a connected person is associated with other data entered on the MyComplianceOffice platform. The solution provides conflict checking across employee compliance rules, gifts and entertainment, political contributions, outside business activity, employee trade activity and more.
Connected Persons & Relationships is part of MCO’s Know Your Employee (KYE) compliance suite. KYE provides compliance teams with data collection and facilitates workflow, communications, alerts, approval, reporting and record-keeping for critical compliance tasks.
KYE offers an easy and affordable way to monitor, manage and ensure that policies are followed. The platform engages employees with intuitive desktop and mobile interfaces, enabling them to fulfil their compliance obligations with a minimum of effort.
KYE is part of the MyComplianceOffice integrated platform that can automate compliance programs for supply chain and 3rd party operations (KYTP), and for transaction surveillance (KYT). The three interconnected suites cost-effectively address the challenge of conflicts of interest management and the reduce the risk of misconduct.
What Are Close Personal Relationships?
What’s the definition of a close personal relationship?
A close personal relationship is a regular and ongoing association. The relationship can be romantic, familial, friendly or financial. These close relationships can generate perceived, potential, and actual conflicts of interest. Firms need to understand the relationships of family members, close social contacts, agents of the firm, business partners and employers to identify the potential for the opportunity to disclose material information or influence judgement.
What Are Closely Associated Persons?
What’s the definition of a closely associated person?
The UK Market Abuse Regulation (UK MAR) defines a person closely associated (PCA) as:
- Spouse or civil partner
- Dependent child under the age of 18, including stepchild
- Relative who has shared the same household for at least one year
- Legal person, trust or partnership, the managerial responsibilities of which are discharged by a person discharging managerial responsibilities (PDMR) or by a person referred to in any of the bullet points above, or which is directly or indirectly controlled by such a person, or which is set up for the benefit of such a person, or the economic interests of which are substantially equivalent to those of such a person.
Set the Right Policies and Procedures
Set policies and procedures that define the types and scopes of relationships that must be disclosed.
The impact of relationships and associations can be subjective. Individual judgement on what constitutes a potential conflict can’t be relied on. A personal relationship that leads to a perceived conflict of interest can both damage investor confidence and erode employee trust in the organization.
Requiring workplace relationship disclosure is just as important as requiring the disclosure of close associations outside of the organization. Workplace relationships can also lead to potential conflicts of interest and opportunities to unduly influence judgement. In addition, relationships between employees in the workplace can raise concerns about productivity, bias, favoritism and harassment. Policies and procedures to manage workplace relationship disclosure can help protect firms and employees from potential harm.