COVID-19: FCA Reinforces Market Abuse and Conduct Expectations

June 30, 2020

The UK Financial Conduct Authority (“FCA”) has reinforced its expectations on market conduct during the COVID-19 pandemic, recognising that the opportunities for market abuse are amplified in the current climate. All market participants, including issuers, advisers and anyone handling inside information, must continue to act in a manner that supports the integrity and orderly functioning of financial markets.

A failure to comply will likely lead to enforcement action being taken by the FCA, which has reiterated that it will continue to monitor and investigate firms.

This article provides practical guidance that market participants can take to ensure they meet the FCA’s expectations in the current environment concerning the use of inside information and mitigate the risks of market abuse.


On 27 May 2020, the FCA published issue 63 of its Market Watch Newsletter (the “Newsletter”). The Newsletter sets out the FCA’s expectations in relation to market conduct, including the identification, handling and disclosure of inside information, in the context of COVID-19.

Dechert’s March 2020 article on COVID-19 Coronavirus Business Impact: Regulatory Impact – Focus on Global Market Abuse Risks, reported that COVID-19 had increased firms’ exposure to market abuse risks in a number of ways, in particular due to (i) the increasingly frequent circulation of new inside information regarding firms’ financial outlooks, and (ii) the compliance risks posed by remote working. These trends have been echoed by the FCA in the Newsletter. The FCA anticipates that increased activity in the capital markets resulting from issuers raising funds in response to the pandemic will lead to increased interactions and flows of inside information between issuers, advisers and other market participants. This activity, combined with alternative working arrangements, creates additional market abuse risks.

We set out below the FCA’s expectations and some of the practical steps that market participants can take to mitigate the risks of any enforcement action.

Key risk areas and practical steps

Market participants should continue to assess market abuse risks and whether their procedures, systems and controls in place to address their obligations under the Market Abuse Regulation (“MAR”) remain adequate to mitigate any new risks. This includes in the context of new working arrangements. To mitigate such risks, the FCA is encouraging market participants to focus in particular on the following areas during the pandemic:1

Identification, handling and disclosure of inside information

The FCA expects issuers to ensure that inside information continues to be appropriately identified and handled by all persons involved in the information chain to prevent its misuse for insider dealing or commercial advantage. Issuers should also ensure that inside information is appropriately disclosed to avoid misleading investors.

Firms should consider taking the following steps:

  1. Assess new information – consider whether new information is inside information, taking into account that the pandemic may have altered the nature of information that is material to a business’s prospects.2 Issuers should also consider whether new inside information is materially different from previously publicly announced forecasts such that it should be disclosed.

  2. Restrict access to inside information – continue to restrict access to inside information to those who need it for the proper fulfilment of their role. Market participants should ensure that their controls restrict access to inside information in light of alternative working arrangements (e.g. using secure IT systems) and that staff accessing such information can be supervised remotely.

  3. Maintain insider lists – ensure that insider lists are kept up to date (including the reason for a person being included on the list and having access to inside information). Advisers acting on behalf of issuers are also expected to maintain their own insider list. For the purpose of monitoring new sources of potential inside information, firms should consider maintaining additional lists, such as confidential lists, to record individuals who may have access to confidential information that has not been deemed inside information.

  4. Provide training – reaffirm that persons on insider lists continue to be aware of their legal and regulatory duties in relation to handling inside information, insider dealing and the unlawful disclosure of inside information. Issuers should also consider conducting refresher training for relevant staff on these issues.

  5. Make relevant disclosures – firms must continue to comply with their MAR obligations to disclose inside information as soon as possible.

  6. Be prepared for leaks – when permitted to delay the disclosure of inside information in accordance with MAR, firms must be extra vigilant about the possibility of leaks and rumours, in particular given market uncertainties and new working arrangements. Firms should prepare a holding announcement to be used in the event of a leak and disclose inside information as soon as possible after the conditions for delay are no longer satisfied.

  7. Verify announcements – firms must carefully verify announcements to ensure they are complete and accurate, and do not contain false or misleading information.

  8. Document decisions – not only is it important that firms take the correct decisions with regard to disclosing inside information, but it is equally important to maintain contemporaneous and complete records of such decisions so that they can be justified should they ever be the subject of challenge by the FCA.

  9. Address risks presented by remote working – ensure that the firm has appropriate controls in place covering: (i) market soundings (information communicated before the announcement of a transaction to gauge potential investor interest and which play an important role in facilitating capital raising transactions); and (ii) personal account dealing, given the heightened risks due to staff working from home. For those making market sounding disclosures, they should maintain appropriate records of their interactions, for example, through recorded lines or written minutes.

Market surveillance

The FCA expects market participants to maintain robust market surveillance and suspicious transaction and order reporting (STOR) in the context of changes in market conditions and alternative working arrangements.

Firms should review and update their risk assessments and surveillance systems in response to COVID-19, to ensure that they continue to detect any new and heightened market abuse risks, such as the unlawful disclosure and misuse of inside information concerning recapitalisations, as well as manipulative behaviour which may disrupt the recapitalisation and price formation process.


The FCA’s Business Plan for 2020/21 highlighted that whilst the FCA’s primary focus will be on mitigating the impact of COVID-19 on the markets and consumers, firms would still be expected to comply with their regulatory obligations, with enforcement action being taken where appropriate (see Dechert’s May 2020 article FCA Enforcement Risk: The Year Ahead). The FCA develops this position further in the Newsletter, providing guidance to market participants on how they can address some of the risks which arise as a consequence of COVID-19.

Firms will continue to be under scrutiny during the COVID-19 pandemic given the risks inherent in an expected increase in activity in the capital markets and as they adapt to new working conditions. However, by adhering to the guidance and practical steps set out above, firms will be better placed to avoid any enforcement action.


1) Additionally, the Newsletter suggests that firms should focus on meeting the transparency and short position covering requirements under the Short Selling Regulation, and identifying and managing conflicts of interest that may arise around capital raising events.
2) For example, information which may have a significant effect on a company’s share price could include: (i) details on the company’s future financial performance, such as access to finance and funding, including through government schemes, and changes to dividends or buy-back schemes; and (ii) the company’s ability to continue or resume business, including amendments to business, strategy and return to work plans.

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