The Financial Conduct Authority published a Market Watch newsletter setting out supervisory observations from reviews of corporate finance firms’ systems and controls for handling inside information, focusing on compliance with the UK Market Abuse Regulation (UK MAR) in advisory and corporate broking activity for small and mid-cap issuers. The work identified heightened market abuse risk in firms that routinely possess inside information and is intended to help firms benchmark their arrangements against FCA expectations. Key issues in market soundings included weak governance over the number of Market Sounding Recipients contacted, heightened unlawful disclosure risk where “gatekeeper” consent is followed by uncontrolled expansion of email recipient lists, and inconsistent practices for ensuring all recipients receive the same level of deal-specific information, with approved scripts cited as good practice. The FCA also flagged risks where an appointed broker involves another broker to sound investors without the issuer’s knowledge, noting this may fall outside the UK MAR safe harbour framework and requires case-by-case assessment of whether disclosures are lawful. Wider control environment themes were most acute in smaller firms, including overfamiliarity that undermines compliance challenge, reliance on unwritten procedures, and weak information barriers, while examples of mitigating practice included documented policies with staff attestations and independent compliance oversight. Reviews also found personal account dealing weaknesses such as trading before approval, insufficient pre-clearance checks, holding-period breaches and poor breach follow-up, with ongoing breaches described as unacceptable. The FCA indicated it will continue UK MAR systems and controls reviews and may broaden scope into governance and compliance arrangements, and that material failings may result in criminal, civil or supervisory sanctions and senior management accountability. It also signalled an intention to run targeted cross-firm personal account dealing reviews in a future supervisory cycle.

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