Legal development

FCA Market Watch 75: Market Soundings - FCA outlines steps for minimising risk of insider dealing and unlawful disclosure

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    The FCA has published edition 75 of Market Watch, setting out weaknesses in the systems and controls of disclosing market participants (DMPs) and market sounding recipients (MSRs) under the market soundings regime. According to the FCA, these weaknesses allowed MSRs to identify details of transactions and identities of financial instruments and trade relevant financial instruments. This usually followed an initial communication from a DMP/request for MSR consent to receive a market sounding.

    Edition 75 of Market Watch follows edition 51 and 58 of Market Watch, which also touched on the market soundings regime

    MSRs and DMPs should note guidance set out by FCA to minimise the risks of insider dealing and unlawful behaviour.

    Key Points

    • Take extra care when making soundings on financial instruments that have few actors and where potential external information held by MSRs could reasonably be used to identify the relevant financial instrument (e.g. assess the scripts used at all stages of the sounding).
    • Be alert to the risk of unlawfully disclosing inside information when communicating with MSRs and seeking their consent to receive the market sounding and inside information.
    • Consider whether the information you provide is essential for MSRs to decide if they wish to receive the information and consider whether the information could be tailored (depending on the nature of the transaction), so as to avoid unintentionally disclosing inside information.
    • Consider specific arrangements and scripts where the MSR is a private individual who will tend to be less sophisticated/aware of potential breaches than corporate clients.
    • Consider and assess standardised information you intend to send to MSRs in your initial communications and requests for consent.
    • Consider gatekeeper arrangements as discussed in edition 51 and 58 of Market Watch e.g. appointing specific teams/compliance staff as the first point of contact for DMPs. Ensure that staff receiving and processing market soundings are properly trained in internal procedures and MAR regulatory framework on unlawful use of inside information.
    • Minimise time intervals between DMP's initial communications and requests for consent, and the MSRs consenting to these requests. This should help reduce the risks of insider dealing where there are delays to MSRs responding to DMPs' request for consent.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


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