Why firms must be ready for rapid regulatory scrutiny
Regulators are asking for market abuse risk assessments more frequently and with less notice. Firms that cannot produce a clear, current, and defensible assessment risk uncomfortable questions about governance, culture, and control effectiveness. Below we outline the themes that matter most today and what regulators increasingly expect to see.
Cover the full risk landscape
A credible assessment must reflect the real breadth of risk across your business. Market manipulation and insider dealing remain central, but today’s regulators look much more widely.
Your assessment should consider governance, employee competence, training frequency, personal account dealing controls, and how new products or clients change your risk profile.
Scenario analysis remains valuable. Enforcement actions and court judgments continue to be useful sources of emerging behaviours.
Ensure information walls still work in a digital environment
Information walls are now predominantly electronic. Regulators increasingly expect firms to treat information walls as a specific risk area with clear oversight.
Reviews should cover access controls, removal of permissions, identification of wall crossers, and physical access checks.
Refresh anti collusion and communication controls
Collusion risk continues to evolve across digital communication channels. Strong frameworks include reviews of chat room access, closure of unused rooms, controlled creation of new groups and alignment with e comms surveillance.
Keep your assessment dynamic and action oriented
A static annual risk assessment is no longer sufficient. Regulators expect a document that evolves with your business and tracks real change.
Committees should receive regular updates and minutes should evidence senior challenge and clear ownership of actions.
Demonstrate how you identify and investigate issues
Surveillance should avoid de minimis thresholds, capture near misses, evidence follow up with individuals and show meaningful analysis rather than automated closure.
Go beyond mitigation and consider risk avoidance
Policies should specify when repeated STORs on a client become unacceptable, set escalation criteria and define when to exit a client relationship.
Draw clear boundaries between market abuse and financial crime
Staff must understand the difference between STORs and SARs, and teams should communicate where relevant to avoid risk blind spots.
Final thought
A market abuse risk assessment is a living document that must remain current and defensible. Investing in it now ensures readiness for short-notice regulatory requests.
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