FSA Publishes Insider Information Review Conclusions

by Robin Pilgrim, LawAndTax-News.com, London

05 July 2007

The UK's Financial Services Authority (FSA) has this week published the results of its review of controls over inside information in relation to public takeovers, and has outlined its next steps.

The review identified a number of areas in which both regulated and non-regulated firms could strengthen their controls around inside information.

Key areas in which improvements could be made included the following:

• Firms being less complacent about the effectiveness of their own internal procedures to prevent leakages;
• Introduction of more formal policies by firms to allow internal reviews to investigate whether inside information had leaked;
• Application of more rigorous criteria for selecting insiders on deals; and
• Improving access controls around IT systems holding inside information.

The FSA will be doing further work on these and other controls with FSA regulated firms through its ongoing supervisory relationships.

In relation to non-regulated firms, the FSA is working with other industry bodies to consider ways to share the good practice points that it has identified, and thus help to raise overall standards.

As part of this, the Markets Division is progressing work on a Statement of Good Practice, which could be used as a basis to demonstrate high standards and robust controls for handling inside information.

Sally Dewar, FSA Director of Markets, explained that:

"Combating market abuse is one of the FSA's top priorities and we are committed to working in partnership with the industry to reduce the incidence of market abuse on the UK's markets."

"As a result of our thematic review we have identified a number of areas where firms could improve their handling of inside information to help reduce the level of leakage. All firms who handle inside information relating to takeovers should review the robustness of their own controls against the findings from this review and make any necessary improvements that they can make."

"Key to these improvements will be the development of a Statement of Good Practice to assist non-regulated firms who participate in the M&A sector. We will be working closely with a range of external stakeholders to develop this."

The review also helped to identify the factors that could contribute to the different types of leaks that may occur around public takeovers: accidental leaks, where staff may have inadvertently allowed information to escape into the public domain; intentional leaks to the media for strategic positioning; and intentional leaks for market misconduct purposes.

Recommended