Market Watch: FCA Insights on Inside Information Risks in Corporate Finance Firms

The integrity of UK markets depends on robust systems and controls that prevent market abuse. Recent supervisory reviews of corporate finance firms have highlighted recurring weaknesses in how inside information is managed. These findings carry significant lessons for firms providing advisory and corporate broking services to small and mid-cap companies.

This article summarises key observations from the FCA’s Market Watch, setting out good practices and areas where improvement is urgently needed.

Inside Information Risks in Corporate Finance Firms.

Corporate finance firms frequently handle inside information, placing them at the frontline of market abuse risks. Failure to implement effective safeguards not only undermines investor confidence but also threatens the reputation of the UK as a global financial hub.

Market Soundings - Managing Disclosure Risks.

Governance of Market Sounding Recipients (MSRs): Reviews revealed that some firms extended market soundings to a large number of MSRs without clear justification. Best practice included senior-level approval of MSR lists to ensure appropriateness and control the flow of inside information.

Risk of Unlawful Disclosure: While gatekeeper arrangements can strengthen consistency, risks arise if information is later circulated without control. Firms must ensure that only wall-crossed individuals receive market sounding details.

Consistency of Information Shared: Firms varied in their approach to deal-specific disclosures. Approved scripts were identified as good practice to ensure all MSRs received the same level of information, as required under UK MAR Technical Standards.

Multiple Brokers Involved: A concerning practice was brokers involving third parties in market soundings without issuer consent. In such cases, only the appointed broker benefits from the UK MAR “safe harbour”. Firms must assess legality on a case-by-case basis and implement policies that reflect this risk.

Control Environments in Smaller Firms.

Supervisory work showed smaller firms often face heightened risks from:

• Informality in policies and procedures – unwritten rules created inconsistencies.

• Weak information barriers – especially in small offices.

• Compliance independence – overfamiliarity reduced effective challenge.

  
  

Good practice included:

• Clear, documented policies with staff attestations.

• Oversight from boards, committees, or external consultants to preserve compliance independence.

Personal Account Dealing (PAD)

Reviews highlighted repeated breaches of PAD rules, including staff trading without approval and compliance functions failing to monitor or follow up breaches. Alarmingly, in some cases, senior staff condoned breaches.

Firms must implement:

• Strong PAD policies tailored to their business model.

• Effective pre-clearance and monitoring processes.

• A culture of compliance, led from the top.

  
  

Ongoing breaches of PAD rules are unacceptable and directly undermine market integrity.

Next Steps

The FCA’s Market Watch serves as a clear reminder: firms must take proactive steps to manage inside information risks. Strong governance, robust systems and controls, and a culture of compliance are not optional – they are essential to safeguarding market integrity.

At Compliance Angle, we help firms benchmark their MAR controls, identify gaps, and implement proportionate solutions tailored to their business model.

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Contact us and schedule a free consultation to find out how Compliance Angle can help you stay on track and ahead of the game.

Call us on 07427792594 or send us an email at info@complianceangle.co.uk