Suspicious transaction reports up by 28% since Financial Conduct Authority took over

Out-Law News | 04 Sep 2014 | 10:32 am | 1 min. read

The number of reports of suspicious transactions received by financial regulators has increased by 28% since the Financial Conduct Authority (FCA) took over from the Financial Services Agency (FSA) in 2013, according to data obtained by Pinsent Masons, the law firm behind Out-Law.com.

Since the Market Abuse Directive (MAD) came into force in 2005, firms seeing suspicious transactions have been required to report these to the regulator for review. A suspicious transaction is one of which there are reasonable grounds to suspect market abuse motives, such as insider dealing or market manipulation.

Financial regulation expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said that the figures were part of a longer-term trend. On average, 117 suspicious transactions are now reported per month compared to 28 per month five years ago, according to the figures.

"The FCA and previously the FSA definitely upped its game regarding the profile of its insider dealing and market abuse enforcement action," he said. "The 'fear factor' from this action and the current high profile markets investigations may be one reason to explain the rapid rise in suspicious transaction reports over the last few years."

"It may be suggested that as the markets have recovered over the past few years that there has been an increase in misconduct leading to the rise of reporting; however, firms and individuals are now far more cautious and making a suspicious transaction report afford them some peace of mind that the regulator won't be knocking down their door early one morning following a tip-off from another source," he said.

The figures showed a steady increase in the number of suspicious transaction reports received by the FSA from 338 in 2008/09 to 1,099 in 2012/13, its final year of operation. The FCA received 1,409 suspicious transaction reports between 1 April 2013, when it took over the conduct and compliance functions of the FSA, and 31 March 2014.

Reports of 'misuse of information', the most frequently reported type of abuse, rose by 29% to 1,267 during the FCA's first year of operation, according to the figures. Reports of 'distortion and manipulation' rose by 24% over the same time period.

"The fear of non-compliance and even higher penalties now outweighs the fear of a regulator asking questions and potential enforcement action," said Ruck. "Firms need to be fully up to speed on their reporting requirements and the current approach of the regulator."