February 11, 2020

Conflicts of Interest for Asset Managers and Personal Account Dealing

In the UK FCA's Market Watch Newsletter (Edition 62 here) the issue of Personal Account Dealing is in focus. The FCA review trading activity and in relation to asset managers found the following:

  • Employees in front-office roles not appearing to understand their firm’s PAD policy despite having signed attestations that they have read, understand and will comply with those policies.
  • Firms and employees considering that ignorance of PAD policies provides reasonable mitigation for PAD in breach of that policy.
  • Employees – including front office, compliance and surveillance – deliberately not declaring external accounts to their employer and/or circumventing requirements. This includes operating undeclared accounts in the names of relatives where trades are executed without any input from the named account holders.
  • Employees trading in breach of the relevant policies including:
    • Trading in products, such as spread bets on the firm’s own shares, when the firm’s policy specifically prohibits this.
    • Dealing in conflict with their professional decisions/ recommendations. For example, research analysts trading against their own recommendations, or fund managers buying a security they have advised their fund to sell.
    • Following client orders. If client orders subsequently appear suspicious, both employees copying those orders and the firm may be compromised when considering escalating concerns. We have highlighted this as a particular risk in a recent speech.
    • Front-running of client orders.

The topic is also discussed further in a post by Deloitte over here. Clearly Personal Account Dealing is highly regulated, the FCA briefing is a good alert for firms to review their own approach to compliance.

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