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Traders Flout Personal-Dealing Bans Across Industry, Watchdog Says

Bloomberg logo Bloomberg 10/18/2019 Silla Brush and Donal Griffin
A logo sits on a window in the reception area of the headquarters of the Financial Conduct Authority (FCA) in the Canary Wharf business district in London, U.K. © Bloomberg A logo sits on a window in the reception area of the headquarters of the Financial Conduct Authority (FCA) in the Canary Wharf business district in London, U.K.

(Bloomberg) -- Traders and research analysts across London are flouting conflict-of-interest policies by trading in personal accounts despite numerous attempts to ban such behavior.

The City of London’s top regulator warned Friday of a government crackdown on firms that fail to stop staff spread-betting on their employers’ shares, dealing securities in conflict with their own buy and sell recommendations and copying client trades.

The Financial Conduct Authority said even compliance and surveillance staff have “deliberately” not declared external accounts to their employers and circumvented policies by trading using relatives’ accounts.

“We are concerned how often we are seeing apparent breaches,” the FCA said in a report that warned traders their actions could result in formal investigation. “This may stem from a culture which has not sufficiently identified the potential for harm to clients or market integrity.”

Numerous banks have attempted to tighten up compliance in the wake of industry scandals such as Libor rigging. UBS Group AG warned staff last year that they would need to seek approval before trading cryptocurrencies, while institutions including Royal Bank of Scotland Group Plc have banned mobile phones from trading floors.

HSBC Holdings Plc told about 6,000 workers at its markets unit in 2017 to cease buying single-name securities, following a similar ban for investment bankers at Goldman Sachs Group Inc. Deutsche Bank AG tightened its rules last year, forcing workers to seek approval for all trades in exchange-traded funds regardless of their size.

Firms also submit suspicious activity reports on their own employees, yet the FCA said some companies haven’t followed up with their own investigations or disciplinary actions. Some businesses view staff ignorance of their internal dealing policies to be “reasonable mitigation” for any breaches, it added.

To contact the reporters on this story: Silla Brush in London at sbrush@bloomberg.net;Donal Griffin in London at dgriffin10@bloomberg.net

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Marion Dakers, Patrick Henry

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

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