In a recent market watch report, the Financial Conduct
Authority highlighted a troubling trend – organised crime groups (OCGs)
infiltrating equity markets via suspicious trading activities. The report
underscores the need for firms to be vigilant and take proactive measures to
mitigate the risks associated with facilitating such illicit activities.
According to the report, suspicious trading activities by
OCG members, particularly in products linked to UK and internationally listed
equities, represent a significant portion of observed suspicious trading
volumes in equity markets. The Serious Crime Act 2015 defines OCGs as groups
consisting of three or more individuals who collaborate to carry out criminal
activities.
Characteristics of OCG activity in equity spread bets and
Contract for Difference trading include a pattern of trading before merger and
acquisition (M&A) announcements, recruitment of sources of inside
information, and the use of intermediaries to broker inside information.
Moreover, OCGs utilize overseas broking firms with lax standards and employ
facilitators, including employees of authorized firms, to open accounts with
such entities.
The report emphasizes the importance of maintaining market
integrity and highlights the risks posed by groups engaging in premeditated
market abuse. Firms are urged to remain vigilant and familiarize themselves
with obligations to counter the risk of being used to further financial crime
under regulatory frameworks.
Cautionary Steps for Advisory Firms
Key indicators that may suggest a firm is being used to
facilitate insider dealing by OCGs include clients consistently generating
Suspicious Transaction and Order Reports, trading activities preceding M&A
announcements, and clients trading in the same security for the first time.
To guard against OCG exploitation, executing firms are
advised to adopt measures such as communicating a zero-tolerance approach to
market abuse to all clients, requesting documentary evidence of adequate
surveillance arrangements from overseas broking firms, and treating trades
preceding media reports of M&A as potentially suspicious.
Advisory firms are encouraged to caution staff against
disclosing inside information to OCGs and consider limiting references to staff
members with access to such information on social media profiles.
In a recent market watch report, the Financial Conduct
Authority highlighted a troubling trend – organised crime groups (OCGs)
infiltrating equity markets via suspicious trading activities. The report
underscores the need for firms to be vigilant and take proactive measures to
mitigate the risks associated with facilitating such illicit activities.
According to the report, suspicious trading activities by
OCG members, particularly in products linked to UK and internationally listed
equities, represent a significant portion of observed suspicious trading
volumes in equity markets. The Serious Crime Act 2015 defines OCGs as groups
consisting of three or more individuals who collaborate to carry out criminal
activities.
Characteristics of OCG activity in equity spread bets and
Contract for Difference trading include a pattern of trading before merger and
acquisition (M&A) announcements, recruitment of sources of inside
information, and the use of intermediaries to broker inside information.
Moreover, OCGs utilize overseas broking firms with lax standards and employ
facilitators, including employees of authorized firms, to open accounts with
such entities.
The report emphasizes the importance of maintaining market
integrity and highlights the risks posed by groups engaging in premeditated
market abuse. Firms are urged to remain vigilant and familiarize themselves
with obligations to counter the risk of being used to further financial crime
under regulatory frameworks.
Cautionary Steps for Advisory Firms
Key indicators that may suggest a firm is being used to
facilitate insider dealing by OCGs include clients consistently generating
Suspicious Transaction and Order Reports, trading activities preceding M&A
announcements, and clients trading in the same security for the first time.
To guard against OCG exploitation, executing firms are
advised to adopt measures such as communicating a zero-tolerance approach to
market abuse to all clients, requesting documentary evidence of adequate
surveillance arrangements from overseas broking firms, and treating trades
preceding media reports of M&A as potentially suspicious.
Advisory firms are encouraged to caution staff against
disclosing inside information to OCGs and consider limiting references to staff
members with access to such information on social media profiles.
