Jun 27, 2023

The Trade Demand for integrated surveillance doubles as regulators up pressure Surge comes as SEC logged a record $6.4 billion in penalties last year. Integrated trade and communications surveillance has seen a 100% increase over the last year as regulators continue to ramp up enforcement actions, a SteelEye report has found. The report’s findings come as regulators up their enforcement actions related to communications and trade surveillance on both sides of the Atlantic. In 2022, the UK Financial Conduct Authority (FCA) issued almost triple the number of fines compared the previous year. Last year, the SEC issued a record $6.4 billion in penalties, representing a 9% increase on the previous year. Fines totalling $1.1 billion were handed out to 16 Wall Street players for failing to monitor their workers or stepping in to prevent communications via unauthorised messaging apps (such as WhatsApp). Just last week JP Morgan was ordered to pay $4 million civil monetary penalty to the SEC following the deletion of 47 million electronic communications. It was the latest in a series of orders issued by the SEC to the bank for failure to preserve records. Previously, regulatory reporting was found to be the highest investment priority across firms, however a year on SteelEye’s 2023 Annual Compliance Health Check Report – which surveys more than 300 senior financial services compliance and risk professionals – has found that investment in communications and eComms surveillance is now the primary focus. Of the respondents, 77% highlighted it as a main priority for 2023, while 25% specifically identified it as the top investment focus. Matt Smith, chief executive of SteelEye stressed the importance of integrated surveillance as compliance departments of global financial institutions face increased pressure from regulatory bodies – which continues to be exacerbated by technological advancements. “To meet regulatory demand, financial firms need to get better at detecting potential market manipulation.” he said. “However, they won’t be able to do that if they continue to grapple with a proliferation of data, systems, and platforms. As stretched compliance teams confront a seemingly endless list of challenges, integrated surveillance will be critical in helping firms successfully navigate an increasingly complex and data-dependent regulatory environment.” In terms of the key challenges facing firms, views differed between jurisdictions. In the UK, managing regulatory change and dealing with regulatory queries/investigations were both highlighted as the main hurdles by respondents – each highlighted by 42% of respondents. Conversely, in Europe, the most common challenge was found to be keeping abreast with – and implementing – regulatory change (41%). In the US, just over 41% confirmed that the struggle with using management information (MI) was the top issue, closely followed by managing market abuse and manipulation risk challenging (39%). Despite the recent regulatory challenges, overall, the report found that 60% of firms believe regulators are easier to deal with compared to five years ago. According to SteelEye: “These positive attitudes towards the regulator could have to do with technological advancements, which are making compliance processes more streamlined and straightforward. Equally, it could be down to more concise and clearer communication from regulators.”