Quarter of Iseq firms fall short on insider information compliance

Twenty-five per cent of Iseq-listed companies surveyed under a Central Bank review of compliance with market-abuse rules did not have important lists of people holding insider information that was announced to the stock market.

The Central Bank examination also found that there has been an almost 30 per cent drop in stockbroking and other trading firms reporting suspicious trades since 2018, even though trading volumes have increased over the period.

The regulator said that this “may indicate a failure by firms to keep their processes up to date with the volume of their trading activity”.

Meanwhile, the bank also concluded that advisory firms to publicly-quoted companies and market-listed debt often have an “informal approach” to defining inside information and how to safeguard this. It also found that firms sometimes allowed staff in on market-sensitive information that they do not need to access.

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Market Abuse Regulation (MAR), which was brought into force across the European Union to replace mostly national rules, requires that companies that issue shares or other market-listed financial instruments make potentially market-moving inside information public as soon as possible. The aim of the rules are to prevent insider trading, unlawful disclosure of information and market manipulation in increasingly sophisticated financial markets.

The Central Bank has completed its biggest review into market-abuse risks by writing Dear CEO letters to market issuers, trading companies and advisory companies highlighting common issues and reminding them of their responsibilities. While supervisors observed some good practices, the bank has also imposed specific risk-mitigation programmes on firms where it found issues.

A spokesman for the Central Bank declined to comment on whether anything emerged from the review that has triggered, or may lead to, enforcement investigations, or required it to file reports with An Garda Síochána.

Information gaps

The Central Bank examination found instances of information gaps on insider lists that were completed among 22 Euronext Dublin companies surveyed, including a rationale as to why certain people had access to information that could move a share price. Only two of the Euronext Dublin main market companies could prove they took all reasonable steps to ensure insiders were aware of, and acknowledged, their duties.

Potential sanctions for market abuse range from Central Bank directions and restrictions to fines of up to €10 million or 10 years in prison in cases of criminal conviction.

"Misconduct on securities markets undermines transparency and trust among market participants and is detrimental to investor protection. MAR is a critical component in deterring misconduct and identifying market abuse where it occurs," said Derville Rowland, director of financial conduct at the Central Bank.

"As the scale of securities market activity carried on in and from Ireland increases, so too does the obligation of market participants to ensure their organisational arrangements to identify, mitigate and manage market-abuse risk are effective; having regard to the nature, scale and complexity of their operations."

Ms Rowland added: “The findings published today show a need to raise standards and embed cultures that identify, mitigate and manage market-abuse risk more effectively.”