Duff & Phelps' Kinetic Partners division has published research in its annual Global Enforcement Review showing that in 2014, market integrity was a key priority for FCA enforcement. In 2014, the FCA fined firms and individuals a total of £1.23 billion for market integrity related breaches, which included abusive market behavior such as: manipulation, insider dealing, FX failings and benchmark (i.e. Libor) manipulation. Kinetic Partners analyzed publicly available data from financial services regulators across the UK, U.S. and Hong Kong to assess regulatory trends and their effects on the financial services industry.
Kinetic Partners’ division research also found that market integrity was the second most cited offense among fines filed by the FCA against either firms or individuals, totaling 10 for the year, behind customer protection, which accounted for 16 fines. However, despite fewer actions being taken against market integrity breaches, this classification nevertheless accounted for a greater share of the sum total of fines than any other category of violation during that period. In total, the FCA handed down fines of £91.6m for customer protection.
Kinetic Partners' division also found that fraud/deliberate misconduct accounted for seven of the fines amounting to £1.59 million and compliance failure accounted for seven fines amounting to £149.1 million in penalties.
Outside of the UK, market integrity was a focus of regulators in other jurisdictions as well. In the U.S., for example, the number of insider trading cases brought by the U.S. Securities and Exchange Commission (SEC) in 2014 (52) was 18% higher than in 2013, when there were 44 actions. The number of market manipulation cases at the SEC increased as well to 63 in 2014, up from 50 in 2013. 2014 also saw the SEC bring its first enforcement action for market manipulation against a high frequency trader.
Monique Melis, Managing Director and Global Head of Regulatory Consulting at Duff & Phelps' Kinetic Partners division comments:
“Regulators are particularly focused on cases of market integrity and consumer protection, as they face continued pressure from politicians to demonstrate to the public that the industry is moving in the right direction. The large fines imposed in these areas of enforcement act as a valuable tool for deterrence. Firms’ investment in controls must increasingly reflect this and they should have a robust central monitoring function and compliance system in place to ensure that both the firm and its employees are operating with integrity.”
Simon Appleton, Director of Regulatory Consulting at Duff & Phelps' Kinetic Partners division comments:
“The best way firms can protect themselves against enforcement, other than through prevention techniques, is to identify abuse and report the suspicion before it comes to the regulator’s attention. The public expects fair and orderly markets and level playing fields; they expect those operating in the markets and employed by regulated firms to act with integrity and in the consumers’ best interests. This means, it is the obligation and burden of those firms and employees to maintain market confidence.”
About Kinetic Partners
Kinetic Partners, a Division of Duff & Phelps, provides a full range of award-winning regulatory consulting, compliance consulting, risk advisory, due diligence, tax advisory, corporate recovery and forensic and dispute services to financial services clients who value their expert service delivery and unique approach. Established in 2005, they have built a multidisciplinary team of recognized experts drawn from regulators, financial institutions and leading professional services firms. They are a trusted advisor to over 1,300 clients across their 10 offices in New York, London, Hong Kong, Cayman Islands, Channel Islands, Chicago, Dublin, Luxembourg, Singapore and Switzerland.
About Duff & Phelps
Duff & Phelps is the premier global valuation and corporate finance advisor with expertise in; complex valuation, dispute and legal management consulting, M&A, restructuring, and compliance and regulatory consulting. The firm’s more than 2,000 employees serve a diverse range of clients from offices around the world. For more information, visit www.duffandphelps.com.
M&A advisory and capital raising services in the United States are provided by Duff & Phelps Securities, LLC. Member FINRA/SIPC. Pagemill Partners is a Division of Duff & Phelps Securities, LLC. M&A advisory and capital raising services in the United Kingdom and Germany are provided by Duff & Phelps Securities Ltd., which is authorized and regulated by the Financial Conduct Authority.
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Ellie Goodger
Kinetic Partners, a Division of Duff & Phelps
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