Market Abuse Regulation (MAR) Effects on U.S. Based Brokerages
As of July 3, 2016, new regulations called the Market Abuse Regulation (MAR) went into effect. The Market Abuse Regulation (MAR) replaces the civil market abuse framework established under the Market Abuse Directive (MAD) and will be enforced by the Financial Conduct Authority (FCA).
The MAR has many similarities to the UK’s existing regime, but extends its directives to other structured products, derivatives and asset classes, and includes more stringent controls and requirements at the reporting level and affects operations across the globe.
MAR’s Broader Scope
With the implementation of the MAR, any intermediary that provides investment services such as commodities, equity shares, bonds, derivatives instruments, funds, structured products and others to clients will feel the impact of MiFID II. Private banks, hedge fund managers, investment banks, wealth management services, brokers and asset managers are just a few examples of the intermediaries that are equally impacted by this mandate. Additionally, the MAR applies to any individual who trades a security in a European Organized Trading Facility (OTF), regardless of where around the globe they might be physically located.
More Robust Reporting Requirements
Within the MAR, there is a great deal of language detailing the records that must be kept in accordance with any action regarding a trade. These records must contain comprehensive and accurate information to include items such as electronic communications, minutes from meetings and recordings of telephone conversations. All records must be available for instant retrieval at the request of local regulators and stored in a medium that does not allow data to be altered or deleted. Clients must be able to access these records for at least five years while regulators must be able to do so for at least seven years.
Street Contxt Works with Brokers to Establish MAR Compliance
Electronic communication distributed by brokers to their clients is automatically indexed in a firm-wide repository, making it searchable. You can instantly retrieve a record of stored communication history with any client that you publish to for up to seven years, satisfying the MAR reporting requirements.
To further simplify being compliant, Street Contxt clients have been creating separate distribution lists by segmenting European-based clients that are impacted by MAR. Having a targeted distribution list on Street Contxt helps brokers have a one-stop destination for all information retrieval about historic communication with their European-based clients.
Street Contxt maintains a comprehensive set of security policies and standards designed to ensure comprehensive protection of information security. We have adopted the International Standard ISO/IEC 27002:2013 as the basis of our security controls, and developed a comprehensive framework of security policies and standards encompassing all of the control areas identified by the standard. This is the same standard followed by global banks, brokerages and stock exchanges around the world – the standard used to protect all information shared with your clients.
Insider Information Changes
With the MAR comes a more precisely defined terminology in regards to insider information. It defines such information as that which has not been made public. If it was to do so, it would have a significant effect on the financial instruments in question or its related derivatives. The draft technical standards (DTS) mandate that insider information be disclosed to the public within a certain time frame. This timely notification of that data must be posted and maintained on the issuer’s website for at least five years. If this information is delayed in its disclosure, the issuer must divulge the reasoning and conditions behind their decision. While internal records justifying the delay are to be maintained, issuers will be required to communicate this information only when requested per MAR directives.
Those issuers who are savvy enough to take advantage of this additional layer of transparency can expect to do well with the additional mandates of MAR. Updating current data to accommodate the additional compliance directives and ensuring that all applicable intermediaries are aware of them is crucial.