FCA reports surge in suspicious transactions

The number of suspicious transactions indicating possible market abuse reported to the UK’s financial regulator has soared after tighter European rules were introduced in July last year.

Data show that a record 3,730 suspicious transaction reports have been filed to the Financial Conduct Authority in the first nine months of 2017 alone. This represents a 24 per cent leap on the whole of 2016, which was already the highest year on record. In 2015, the figure stood at just 1,831 reports.

The regulator uses the raw data to pinpoint unusual patterns that could indicate insider trading.

The FCA has previously said the introduction of European market abuse rules has had a disproportionate effect on the number of suspect deal reports it receives.

Mark Steward, the head of the FCA’s enforcement division responsible for cracking down on insider dealers and scammers, said last month that the watchdog had experienced a 77 per cent increase in reports since the Market Abuse Regime was introduced in July 2016.

The rules require companies such as banks and brokers to report more data to the regulator, especially concerning suspicious transactions, over a wider range of markets. It also requires publicly traded companies to flag information sooner that could cause a spike or slump in their shares. Listed companies have to notify the watchdog if they choose to delay publishing the information.

The timeliness and accuracy of disclosures by public companies — particularly those beyond financial services — has recently been a hot topic for the FCA, with companies such as Mitie and Cobham disclosing FCA investigations.

Last week, the FCA levied its highest penalty for a listing-rules breach, fining Rio Tinto £27.4m for breaching disclosure and transparency rules over a coal deal in Mozambique. The fine was a co-ordinated move with US authorities, which charged the company and its former chief executive and former chief financial officer with civil fraud.

Cleveland & Co, the legal advisory business, said the new regime’s requirement to report even cancelled or incomplete transactions could be behind the spike in suspicious reports.

“It is important to note that the compliance costs in dealing with suspicious transaction reports has grown and the increased costs are also being borne by businesses that have an impeccable record in this area,” said Emma Cleveland, managing director at Cleveland.

Mr Steward warned that the regime — combined with other sweeping rules from Brussels that take effect in January known as Mifid II and which also require extensive reporting by the industry — will present a “sea change” in the data that the FCA is able to scrutinise.

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