The FICC Markets Standards Board (FMSB) has publishes a transparency draft of a new Statement of Good Practice on Suspicious Transaction and Order Reporting.
The Statement covers the identification of suspicious transactions and orders and their reporting to the relevant regulator. In the UK and other jurisdictions regulated market participants have an obligation report such transactions to their regulator – in the UK this is as a Suspicious Transaction and Order Report (STOR) submitted to the FCA.
A suspicious transaction or order is one where there is a reasonable suspicion that it could constitute insider dealing, market manipulation or attempted insider dealing or market manipulation.
FMSB says the statement is designed to be relevant to all front-office and control or support function personnel who are active participants in the FICC markets and to those who are engaged in the monitoring and surveillance of those activities.
Where the document describes good practice in relation to submission and handling of reports specifically to the FCA, this is by definition limited in scope to entities regulated in the UK. Firms however may choose to extend or incorporate this practice to cover other jurisdictions where necessary or appropriate as part of a holistic approach to notification and analysis, the Board adds.
The latest, fifth, Statement issued by FMSB says there are 10 Good Practice Statements which firms should look to when considering their own practice in reporting suspicious transactions and cover issues including:
- Firms should have a clear organisational structure in place to facilitate monitoring and reporting of suspicious orders or transactions. ?
- Surveillance activities should be owned by a function which is independent from the business activities. That function should have the expertise and experience to provide control over their business activities. ?
- Electronic surveillance systems should analyse trading data through a set of logic and look back scenarios searching for potentially suspicious behaviour. ?
- Firms should provide guidance to employees on required actions after a STOR is submitted. ?
The Statement of Good Practice also covers issues such as training and record keeping. ?
FMSB members and other interested parties are invited to comment on the proposed Statement of Good Practice before it is finalised by FMSB. This consultation will run until 3 August 2018 with the final document expected to be published shortly thereafter. ?