Financial services firms could be doing more to safeguard against risks flowing from handling confidential information, says FCA review

Hayley Kirton
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While firms are good at identify risks linked to handling information, they could do more to protect against them (Source: Getty)

Financial services firms have further work to do to safeguard against the risks of handling confidential and inside information, according to a thematic review published today by the Financial Conduct Authority (FCA).

Despite organisations being able to identify key risks that stem from working with sensitive information, the FCA concluded that not enough was being done to manage the potential pitfalls.

The review, which studied a sample of investment banking firms, discovered that the control of information varied in quality, with some practices heightening potential risks.

In light of its findings, the FCA has urged firms to consider what circumstances are likely to create a higher possibility of risk, such as a change to the organisation's business model.

It also called for firms to make sure staff at all levels know what role they play in guarding against risks and to ensure they have robust systems in place to manage the flow of confidential and inside information.

Even though the review was aimed at the financial services sector, Michael Ruck, who was formerly with the FCA and is now a senior financial services enforcement lawyer at Pinsent Masons, remarked:

“While reiterating the current regulatory theme that senior management and business heads should take responsibility for this issue, the issues raised in the Thematic Review apply much more widely than simply to regulated financial services firms. An extremely large number of firms across a broad spectrum of industries need to consider the identification and management of inside information. The consequences for failing to do so appropriately can include criminal prosecutions and custodial sentences for activities including insider dealing, fraud and other financial crime related offences.”

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