FSA updates insider information review

Steps to reduce market abuse risk through insider information are the subject of the FSA’s Market Watch 27

LONDON – The UK Financial Services Authority (FSA) has updated its thematic review of controls on insider information by publishing Market Watch 27, building on the provisions of Market Watch 21 released in July 2007. The area has come under increased scrutiny following alleged rumours of market abuse that affected the share prices of UK bank Halifax Bank of Scotland (HBOS).

Adam Kinsley, director of regulation at the London Stock Exchange (LSE), says: “We support the FSA and the industry bodies who drafted this guidance, and share their objective to ensure that UK markets continue to be regarded as well-regulated and clean. These principles published by the FSA today provide helpful guidance to anyone who comes into contact with insider information. They will help ensure the UK remains a world-leading financial centre with high standards and good practices.”

Market Watch 27 includes a set of voluntary good practice principles for handling insider information, drawn up by industry experts such as issuers and corporate finance houses. The FSA stresses that its market abuse strategy is working in close partnership with industry. The principles are broadly based upon restricting access to price-sensitive material, but are particularly aimed towards the unregulated community and in those areas laid out in Market Watch 21.

Areas flagged by Market Watch 21 as requiring additional protection include IT controls, improved overall vigilance to restrict the number of insiders, and a proactive approach when leaks occur. The new publication includes an update on the FSA’s follow-up with regulated firms with examples of strengthened controls. It also includes industry debate on how firms should address questions such as when to initiate internal leak enquiries, and reducing the number of insiders on deals.

Alexander Justham, FSA director of markets, says: “It is important that the FSA continues to engage in partnership with the industry on these matters; in particular, I would like to see more efforts to crack down on the length of insider lists and to see firms putting greater focus on the importance of leak enquiries. I want to thank the industry practitioners who worked with us to draw up the Principles of Good Practice, which will be a vital element of our endeavours to combat insider dealing.”