Dear Clients and Friends,
Market Watch 83: Sounding Off on Governance
The regulator does not often direct their communications specifically to Corporate Finance firms, so when they do, it is worth taking note. The findings in the FCA’s Market Watch 83 are useful for other regulated firms as well as their Corporate Finance counterparts when assessing their compliance arrangements.
Key Takeaways:
- Market Soundings – Governance is Essential
Extending market soundings to large numbers of recipients (“MSRs”) without clear justification is not acceptable. Sharing information beyond wall-crossed individuals, for example, through uncontrolled email chains and large-scale team meetings, creates a clear risk of unlawful disclosure. Inconsistencies in the information provided to different recipients also fall short of regulatory expectations. Having gatekeeper arrangements, or receiving information via a controlled channel, does not, on its own, mean that internal governance is complete.
What Now?
Good practice includes a senior employee or a relevant committee approving both the initial list and any additional MSRs. Do you have a documented rationale for every MSR? Do your processes prevent information from being shared beyond authorised participants?
- Smaller Firms – Proportionate ≠ Informal
Even though smaller firms are expected to have policies and processes that are proportionate to their size, they can be more exposed to organisational and cultural risks. When compliance and business teams work closely together, it can be harder to maintain independence. Small offices or shared open-plan workspaces can also make it tricky to keep information barriers fully effective.
What Now?
Proportionate does not mean avoiding formalised policies and procedures. Compliance independence can be maintained ‘through oversight via the Board or an external consultant’ (these are the FCA’s words, not a recommendation for our services).
- Personal Account Dealing
Personal Account Dealing (“PAD”) remains a risk area for managing market abuse risk. The regulator comments on weak PAD systems and controls, from staff trading before seeking approval, failing to follow holding periods and compliance teams not performing sufficient checks. In some cases, these breaches even occurred with the consent of senior members of the business, highlighting how critical culture is at a Firm.
What Now?
The policy you adopt should absolutely be risk proportionate for your firm and strategy, but it then needs to be implemented effectively. A laissez-faire approach may suggest to the regulator that the firm is poorly managed elsewhere in the business. If staff are breaching the PAD policy, are these breaches being consistently recorded and escalated? Are repeat offenders subject to appropriate sanctions?
Final Thoughts
Proportionate but well-executed governance is central to being able to demonstrate compliance to regulators, whether it be in managing market soundings or mitigating the risk of unlawful disclosure or evidencing an effective compliance function. Sensible and pragmatic controls can be adopted that don’t adversely impact the commercial business but do mitigate regulatory and significant reputational risks of failure.
Judd Advisory
September 2025
