FCA drops BoE audio probe but Bank acknowledges lapses
The Bank of England “could have identified sooner” the “misuse” of an audio feed of its press conferences after being warned of a potential problem, the BoE’s internal auditor has found.
However, the UK’s financial watchdog said it had closed its investigation into Encoded Media, the company at the centre of the storm, saying it has found no “activity of concern or misconduct”.
Last year The Times alleged that some traders had access to an audio feed of Bank of England press conferences that was quicker than the traditional TV or Youtube broadcasts.
The feed was allegedly provided by Encoded Media, which the Bank employed to stream the press conferences to Youtube. As an audio-only feed, it could reach traders up to eight seconds faster than the video feed.
Access to a quicker feed could potentially have allowed traders to profit by knowing what governor Mark Carney was saying slightly before others. The Bank said the audio feed was “wholly unacceptable”.
The Bank stopped Encoded Media’s access, referred the issue to the Financial Conduct Authority (FCA) and commissioned a review by the Bank’s internal auditor. Both the auditor and the FCA published their findings today.
The BoE’s auditor said that an employee of Encoded, an Essex-based technology company, who was a contractor in the Bank “installed equipment… that supported an audio feed and subsequently asked Bank staff to ensure this was active during press conferences”.
FCA finds no market abuse
Encoded has always denied wrongdoing. It said last year that it is “impossible to ‘hack’ or ‘eavesdrop’ any live public event or press conference. Any such suggestion is dismissed out of hand”.
The Bank’s internal report said: “There were occasions where, with the benefit of hindsight, this misuse by a third party supplier of the Bank’s audio feed could have been identified sooner by the Bank.”
The auditor highlighted that an external party made an allegation about Encoded in 2018 that was not followed up. This was because it was incorrectly “not considered possible in the Bank’s press conference environment”.
Although the Bank characterised the audio feed as “misuse”, the FCA found that Encoded has not fallen short of the market abuse regulation.
The financial watchdog said: “We do not believe the audio feed contained any inside information, nor have we found any activity of concern or misconduct.
“Our enquiry is now closed and we have informed the Bank and other parties connected to the review.”
The Bank’s auditor found processes were not up to scratch in a few areas. It said that it “did not fully assess the risks of contracts” with companies such as Encoded. And it said there was “insufficient clarity” about whose responsibility the issue was.