David Biggin, PA Consulting financial services expert, comments on the relaxed rules for the financial services sector as employees now work at home.
The article notes that when regulators granted some leeway for financial institutions, in effect permitting virtual working during the Covid-19 lockdown, they shifted unforeseeable new conduct risks on to the banks.
As home working becomes the norm even for traders, the scale of those risks, the effectiveness of counter-measures, and how far senior managers will ultimately be held to account will only emerge as the crisis unfolds. It is no surprise that the regulatory authorities have chosen to relax certain rules such as the requirement that audio recordings are made of all voice trades: such concessions were vital to keep the markets open during the lockdown. But, importantly, there has been no wider relaxation.
David says: “Regulators like the Financial Conduct Authority have relaxed what they expect from companies in certain respects. There is some leniency in timeliness [on reporting], in particular, but the absolute standards are unchanged. They are not changing their stance on market abuse, for example. Indeed it would be strange if they announced that their rules of accountability suddenly did not apply during a time of market stress.”
Yet there is no regulatory blueprint for how institutions should manage their staff now that business has overnight switched away from regulated corporate spaces and is conducted in employees’ homes instead. Responsibility for managing that huge step with all its attendant risks lies squarely with the firms, who are every bit as reluctant as the authorities to see trading cease.
David adds that, though monitoring staff at home is certainly more difficult, the trail of what an employee has done will still be subject to robust scrutiny afterwards. “The one thing we know is that the amount of monitoring that exists in banking and trading systems means that where there is erratic behaviour, in terms of what’s being executed, that’s likely to still be picked up again by the monitoring and compliance checks.” In other words, a pattern of suspicious trades will still look suspicious. And, in the months or years after the Covid-19 crisis, regulators will be able to review dubious transactions.
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