01 Feb 2021
FCA Trader Chat Warning Hints At Virus Misconduct Probes – Bambos Tsiattalou
Partner Bambos Tsiattalou comments in Law360 on FCA’s recent market watch on electronic communications due to a shift to remote working.
Bambos’ comments were published in Law360, 28 January 2021, and can be found here.
“The Financial Conduct Authority’s recent demand that traders and bankers working from home should record their communications has put finance companies on notice that the City watchdog is investigating potential misconduct arising from the shift to remote working during the COVID-19 pandemic…
The risks posed by apps such as WhatsApp are not new — the FCA handed out penalties for disclosing confidential information on WhatsApp in 2017. But Bambos Tsiattalou of Stokoe Partnership Solicitors said the FCA has clearly decided that is a risk that has radically increased in the past year.
The economic fallout from the pandemic has caused a huge amount of market volatility and economic disruption — effectively a stimulus for fraud and regulatory violations — at the same time as working from home on encrypted networks provides the opportunity.
“Clearly, the FCA is concerned that a perfect storm of market volatility, home working and the increasing use of encrypted networks has arrived,” Tsiattalou said. “The FCA’s concerns are not unreasonable. If insider trading is arranged via a WhatsApp chat on personal phones, and it is later deleted, there may be no evidence of the communication whatsoever.”…
…A broad range of activities are included, such as arranging deals and dealing as principal or agent in investments. It includes managing investments, as well as managing mutual funds, alternative investment funds and establishing, operating or winding up a collective investment scheme.
“In regulated financial services industries, when it becomes the norm for people to be on encrypted networks to which their employers have no access, the risk of fraud increases,” Tsiattalou said. “The merest hint of an impending IPO or an important new development, such as the approval of a new product, can amount to insider trading.”
