TR15/1: Asset management firms and the risk of market abuse

This paper presents our findings from the thematic review of how asset management firms control the risk of committing market abuse.

Why are we issuing this thematic review?

Market abuse damages market integrity and undermines confidence in financial markets. At a firm level, association with market abuse causes reputational damage and can lead to substantial financial loss. Our regime requires firms to have effective processes to identify, monitor and manage the risk of market abuse.

The review considered how firms control the risks of insider dealing, improper disclosure and market manipulation, with a primary focus on equities and insider dealing.

What did we find?

Our overall finding was that firms had put in place some practices and procedures to control the risk of market abuse. However these are only comprehensive in a small number of firms.

In many firms further work is required to ensure these operate effectively and cover all material risks. In particular, firms need to pay more attention to the possibility of receiving inside information through all aspects of the investment process and take steps to manage this risk. Firms generally also need to improve the effectiveness of post-trade surveillance. Only a minority of firms had appropriate controls for these matters.

TR15/1: Asset management firms and the risk of market abuse

Who is the review aimed at?

Asset management firms and trade bodies representing asset management firms.

What are the next steps?

We will shortly be writing to all the firms in our thematic sample to provide individual feedback.  Where firms did not effectively manage the risk of market abuse, we expect them to make improvements to their practices. 

Senior management of asset management firms need to satisfy themselves that their firm's practices to manage the risk of market abuse are appropriate. We will follow up on this through our routine supervision.

Find out more:

We have taken a number of enforcement cases where we have found evidence of market abuse, including trading on inside information, disclosing inside information and market manipulation.