Fri, Oct 17, 2014

Regulators’ Focus on Market Conduct and Abuse

One common theme identified in our research was that market abuse appeared to be a high priority area for regulatory enforcement in 2013.

Two primary objectives of regulators (globally) are to maintain confidence in markets and reduce financial crime. Their focus is often centered around the detection and prosecution of market abuse, including insider dealing or trading and market manipulation.

Because of the growing awareness of how significantly abusive market activity can impact institutions and consumers alike, Kinetic Partners expects that such activities will continue to be a focus for regulators globally. During 2013, market abuse accounted for a greater share of the total value of fines to individuals than any other category in both the UK and Hong Kong (approximately 45% and 96%, respectively).

In the US, market abuse enforcement actions, which typically relate to insider trading, market manipulation and financial fraud/issuer disclosure, accounted for 162 of the total number of actions taken by the SEC in fiscal year 2013, representing approximately 24% overall.

In the UK in 2013, market abuse was the second most cited offense among fines filed against either firms or individuals, behind unfair treatment of customers.

In 2013 in Hong Kong, market abuse was the leading cause of enforcement action, and for four out of the last five years it accounted for the most investigations of any category. In particular, investigations relating to market manipulation increased more than every other category besides corporate mis-governance.

Financial Services Compliance and Regulation

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