Compliance in isolation part 1: Playing by the rules

How seriously should you be taking your compliance obligations during this lockdown period? According to Helen Bevis it is now more important than ever!

Written by: Helen Bevis, Head of Operations and Strategic Partnerships, SteelEye

There is no doubt about it, we are living through a very strange time and in a completely unchartered territory when it comes to our everyday lives. The idea of a work/life balance has never been more alien, now that work largely is carried out at home, and most of us have already been there, trying to find the perfect surface in our homes to convert into a workstation, perhaps even sizing up the ironing board as an option?

But as a result of this new world, it is no surprise that most of us feel a bit disoriented. Planning for a pandemic was after all not on anyone’s radar and now new routines need to be established. And while most firms have sophisticated plans in place for Business Continuity and Disaster Recovery (DR), no one foresaw this global lockdown, which is forcing firms to find completely new ways of working.

With new government guidance or restrictions almost every day (to flatten out the impact curve) firms are, as a result, constantly having to change and evolve how they execute on their Business Continuity Planning (BCP) and DR plans, which is not a small task!

If we look specifically at compliance, senior managers are having to quickly adapt to these rapidly changing times to ensure their regulatory processes and procedures enable them to stay on top of their obligations. Suddenly Compliance and Risk Officers are not only needing to keep track of what’s going on in the outside world but are also having to do a complete review of their internal systems and workflows to ensure they can record, store, monitor and report on the activities of a remote workforce. Given the enormity of the task and the time pressure involved, this can be a significant challenge!

So, will the regulator be more lenient during this time? Well, we know that the FCA will not ease up on firms during this period, as they expect all firms to have contingency plans in place to deal with major events. But whilst the FCA has been very clear about the fact they still expect firms to meet all their regulatory obligations, there has been some leniency from ESMA. Just in the last few weeks, ESMA has announced both a delay to the implementation of SFTR (by 3 months) and that they will, for a limited period, grant forbearance to firms that cannot ensure that all recordable communications are recorded due to the “exceptional circumstances”.

One might therefore be asking themselves, how seriously they need to take their regulatory obligations during this period. Well if we consider the current COVID-19 outbreak, we see in the news almost every day how situations quickly escalate when people decide the rules don’t apply to them. Not only have we seen a drastic rise in physical cases, but we have also seen social examples where the government has had to close parks in response to people not taking social distancing seriously.

If firms or individuals within the financial services industry took the same approach, flaunting the compliance rules they thought didn’t apply to them, what long lasting impact that would have on the financial markets (or to the economy) when normality is resumed? Well one thing’s for sure, we know that it would have a detrimental effect! In fact, if we consider things like market abuse monitoring, we have already seen a spike in attempts of market manipulation as opportunistic traders try to take advantage of the situation. It is therefore more crucial than ever that firms carry out effective trade and communications monitoring to detect and prevent any signs of financial crime or market abuse.

Here is a reminder of the rules that we should all be adhering to in compliance:

  • Managers must continue to take all steps to prevent market abuse
  • Managers should continue and ensure they can record and monitor all relevant communications from staff working remotely
  • Managers must ensure that all relevant compliance personnel are still able to access their compliance functions
  • Firms should keep regulatory announcements relating to emergency measures, such as short-selling bans, position limits, market suspensions and position disclosure obligations, under constant review
  • Managers should take this time to review their trading documentation and exchange rules, check relevant certificates and stress-test the impact of scenarios involving market interruptions
  • Firms need to ensure that MAR tuning has been put in place to counter for sweeps in price movements and exceptional trading strategies to avoid excessive amounts of false positives
  • Firms should ensure training is available to all those taking up extended responsibilities
  • As things change quickly and situations are fluid, firms should clearly document changes and keep an audit trail of activity.

 

Senior managers are in place to lead by example and set standards. Right now, they need to ensure the current and future protection of their company and clients. Ignoring the rules at this point could have detrimental effects on both the business itself and the wider economy, only leaving a compliance disaster for employees to come back to when this lockdown is lifted.

So, should we all be playing by the rules? The answer is, yes, we cannot afford not to! Stay safe and remember SteelEye are there to help you through your compliance challenges.


Compliance checklist-2

Compliance in ISOLATION part 2: Your checklist for remote working

10 things Risk and Compliance Officers should be thinking about now that most companies are firmly on lockdown and supporting a remote workforce.

READ PART 2


Helen Bevis

 

Helen Bevis
Head of Operations and Strategic Partnerships 
SteelEye

 

About Helen Bevis:

Helen has over 21 years of experience in compliance & trading technology within the financial sector. She as a strong background within banking, having worked in tier 1 Investment Banks, Asset Managers and brand leading Technology Vendors.