Financial Markets Standards Board (“FMSB”) has today published a Statement of Good Practice (“SoGP”) on Unauthorised Trading Frameworks in final form.
The purpose of the publication is to help establish practical, industry-wide guidance for oversight and controls of unauthorised trading, as well as more consistent expectations among firms and regulators regarding the frameworks needed to effectively contain it.
Background
The financial services industry has invested heavily in the design and implementation of risk management frameworks to ensure that activities are conducted within authorised boundaries. This includes avoidance of incidents of unauthorised trading which are a potential source of significant financial loss and reputational damage at industry as well as firm level.
Notwithstanding significant efforts, there is a continuing risk that novel or existing vulnerabilities could allow unauthorised trading to occur or remain undetected.
Active cross-jurisdictional regulatory engagement on unauthorised trading has been bilateral, with detailed feedback provided to individual firms. In the absence of comprehensive industry guidance or published expectations, baseline standards for unauthorised trading frameworks have not been advancing consistently across markets or jurisdictions.
Following on from its work on Front Office Supervision, FMSB therefore convened a Working Group, led by Alison Higgins from Standard Chartered, to develop industry-wide, good practice guidance to support firms in their efforts to prevent, or mitigate, the risk of unauthorised trading activity in wholesale markets. Today’s publication reflects input from across FMSB Members, with both buy-side and sell-side firms contributing. It also benefits from contributions and support from the global regulatory community.
Alison Higgins, Head of Markets UK and Europe and Head of Prime at Standard Chartered and co-head of FMSB’s Conduct & Ethics Committee, said:
“The potential for reputational and financial damage is clear motivation for firms to invest in managing the risk of unauthorised trading. As a Working Group, we identified that firms commonly dealt with many of the key components of a framework but few firms dealt with them comprehensively. An industry-wide understanding of the language used and a thorough approach to setting up a framework was lacking. We hope that this guidance will help to provide a solid foundation for firms, across jurisdictions, and help to inform regulatory expectations around this important topic.”
Myles McGuinness, CEO of FMSB said:
“This publication illustrates the real value of FMSB in identifying gaps where cross-industry guidance is needed and bringing expertise together from across our Membership to fill that gap. I would like to thank all the Members of the Working Group who have contributed to this Statement of Good Practice, in particular Alison Higgins for chairing the Working Group and Sara Cresswell for leading the focus group sessions, as well as Jaspreet Jhaj and Ed Waller from Deloitte for lending their cross-sector subject-matter expertise.”
Notes to editors
About FMSB:
- Financial Markets Standards Board (FMSB) is an industry-led, member-funded global standards body for the wholesale financial markets.
- Created out of the Fair and Effective Markets Review (FEMR) in 2015, FMSB brings together its Members from banks, investment institutions, infrastructure and information providers, corporates, pension funds and interdealer brokers, to develop Standards, Statements of Good Practice and Spotlight Reviews that raise standards of behaviour, competence and awareness – to promote the fairness and effectiveness of global wholesale financial markets.
- As well as standard setting, subject matter experts from member firms debate issues in working groups and are able to benchmark their approaches against industry peers, thus helping to lift standards of conduct.
- FMSB’s full membership list is here
For more information:
Laura Conaghan
+44 (0)7929 72669