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News - 23/06/20

The importance of Compliance in the leaking of privileged data during the Covid-19 pandemic

Britain’s Financial Conduct Authority (FCA) has claimed that capital raising and routine changes arising from the COVID-19 pandemic outbreak may increase the risk of market abuse as the financial market is more exposed to leaks and privileged information from diverged companies. Regarding this matter, companies should protect themselves from these possible leaks by reinforcing and restructuring their compliance programs.

Due to the effects of the pandemic, more companies are approaching the market to recapitalize or raise funds and according to FCA there are much more internal information circulating than usual. Hence, companies must comply with the law regarding market abuse, ethical conduct and conflicts of interest.

The FCA alerts that companies need to ensure that inside information is being well preserved in order to avoid abuse and commercial advantage. Accordingly, companies must establish or restructure compliance programs in order to protect themselves from any possible leakage of privileged and confidential information. [1]

The Compliance team and the ones responsible for the companies’ internal controls must re-examine their Company’s internal systems to restrict access to privileged information. There should be reinforcement in all of the IT systems and processes to reduce the chances of a possible leak. For example, when employees have access to privileged information, their access must be remotely supervised.

Moreover, the issuers must guarantee that employees who have access to confidential information are included in internal lists to fulfill their obligations under the UK Market Abuse Regulation.[2]

According to the FCA, market abuse is happening in the UK. However, market abuse as well as data leakage from British companies could affect international companies complied with the UK companies as well as the European financial market as a whole due to the impact on the market. Thus, it is crucial that companies prioritize the caution and protection of their internal data by reinforcing their compliance programs and internal controls.

 

[1] https://www.law360.com/corporate-crime-uk/articles/1277154/fca-warns-pandemic-could-increase-market-abuse-risks

[2] https://www.jdsupra.com/legalnews/covid-19-coronavirus-regulatory-impact-34439/