eComms Surveillance & Compliance for Financial Services
Important takeaways from last month’s Market Watch report:
Firstly, it was encouraging to see that all the firms were actively monitoring for market abuse and were taking proactive steps to restrict or exit clients of concern. When we see big fines spread across headlines every other week, it can seem like most are not protecting consumers and markets from abuse—but the FCA research told a different story. While some firms had not yet formalized a framework to guide their actions, leaving decisions to be made on a case-by-case basis, it’s an important piece of the puzzle to protect markets.
There were also different approaches to setting quantitative limits for STORs triggering action—some firms using a fixed number, while others make decisions based on a points system. It was interesting to see that one firm offboards clients if they appear to be approaching the STOR threshold, rather than waiting for the limit to be reached. The important balance between first line of defense and the independent quality assurance checks is a key reason why compliance surveillance and 1st line supervision should work hand in hand.
In my view, an effective framework should include both quantitative and qualitative measures, with flexibility for common sense to override. The responsibility for decision-making should rest with compliance teams or a committee independent of senior management, to avoid conflicts of interest.
Additionally, the FCA’s report highlights the importance of surveillance platforms, particularly in monitoring ecomms. As more communication between market participants shifts to digital channels, the risk of market abuse-related financial crime also increases. Having an AI surveillance system in place can help firms quickly detect and respond to any suspicious behavior or activity. In order for firms to read between the lines of their employee communications, I find it crucial that they stay up to date with the latest technology and continuously improve their surveillance capabilities to effectively counter financial crime.