Thematic review on the arrangement of supervision by investment service providers for suspicious transactions and orders
The Financial Supervisory Authority (FIN-FSA) has assessed the arrangement of supervision by investment service providers for suspicious transactions and orders. The objective of the thematic assessment was to find out how investment service providers comply with requirements concerning the prevention and detection of market abuse and how they had arranged supervision for trading.
The thematic review covered the following subject areas:
- How the arrangements, systems and procedures to detect suspicious transactions and orders had been established within the firm.
- How the training of staff on the detection and reporting of suspicious transactions and orders had been organised by the firm.
- How the firm assesses whether to report suspected market abuse incidents detected by it to the FIN-FSA.
In most cases, investment service providers have an automatic trading surveillance system in place, either developed by a third-party provider or internally by the firm.
As a rule, the entire staff had been provided basic-level training on the detection of suspected market abuse, for example, as part of the initiation of new employees or as an online course to be completed annually. More thorough training had been organised for employees participating in the processing or monitoring of transactions and orders.
Investment service providers assess the nature of a suspicious transaction or order relative to the descriptions of insider dealing and market manipulation provided in the Market Abuse Regulation. The Compliance function of the firms makes the final decision about whether to report a suspected abuse incident to the FIN-FSA or not.
According to the FIN-FSA's assessment, the supervision of suspected market abuse by investment service providers is primarily arranged in compliance with regulation. In particular, the FIN-FSA notes that the monitoring of trading must extend to all customers of the investment service provider, regardless of whether they are private persons or professional investors. The monitoring of trading must also cover all orders received and transmitted as well as all transactions executed, irrespective of the financial instrument.
In addition, the FIN-FSA reminds that, in practice, the expertise of staff plays a key role in ensuring the effectiveness and coverage of controls for market abuse in compliance with regulation. The maintenance of expertise is supported by adequate and regular training.
As part of ongoing supervision, the FIN-FSA will continue to pay attention to the arrangement of supervision within investment service providers and to the content, quality and number of STOR reports (Suspicious Transactions and Orders Report) submitted by investment service providers to the FIN-FSA.
The comprehensive and high-quality arrangement of supervision by investment service providers for suspicious transactions and orders is paramount to prevent and detect market abuse, such insider dealing and market manipulation, or attempts thereof. The suspicious transactions and orders reports from investment service providers play a key role in the supervision of market abuse conducted by the FIN-FSA.
For further information, please contact
- Juha Manu, Market Supervisor, tel. +358 09 183 5323 or juha.manu(at)fiva.fi
- Hermanni Teräväinen, Market Supervisor, tel. +358 09 183 5346 or hermanni.teravainen(at)fiva.fi
- Thematic review on the arrangement of supervision by investment service providers for suspicious transactions and orders (pdf)
- Market Abuse Regulation (EU) 596/2014 (“MAR”) Article 16, entry into force on 3 July 2016
- Commission Delegated Regulation (EU) 2016/957 – regulatory technical standards for preventing and detecting market abuse, entry into force on 3 July 2016