In Behavioural Cluster Analysis (“BCA”) we identify the core behaviours which occur most frequently in market misconduct cases. In one sense, this exercise is not new – a number of different authorities and reviews, most recently the FEMR, have recognised the importance of focusing on the behavioural patterns underlying market misconduct. However, this is the first time that these patterns of behaviour have been collated, analysed and published as a single reference point for market participants.
BCA is based on a review of publicly available information set out in a large body of enforcement cases. The review was conducted by the FMSB Secretariat (supported by Macfarlanes LLP and Wachtell, Lipton, Rosen & Katz). This paper sets out the research findings following this review; it does not set out the views of FMSB member firms on the cases or behaviours in question.
The purpose of BCA is not to analyse the merits of individual enforcement cases or to provide a view on the culpability of the individuals or firms involved or any penalty imposed. The review does not seek to provide legal or regulatory definitions of particular practices. Rather, descriptions are provided to illustrate the behaviours in question, so that these can be understood by market participants and factored into systems and controls frameworks.