To effectively recognize, investigate, and report on signs of misconduct, firms need the best available tools which will benefit them in mitigating and managing the risks of market abuse. Detecting insider trading has been one of the top priorities for most firms in the marketplace; a reliable news source is a critical tool in identifying this behaviour.  

Regulators across the globe are cracking down on Insider Trading especially in the aftermath of the COVID-19 pandemic. In Europe, the FCA has said that it expects firms to proactively monitor for insider dealing in the new, hybrid working environment. The FCA supervisory focus is a clear indication that despite the operational challenges of remote working, firms must ensure that they have adequate systems and controls in place to detect and report suspicious transactions. In the US, the CFTC and the SEC are also placing higher focus on Insider Trading; this is demonstrated by the potential Insider Trading scandal related to two senators selling millions of dollars in stock shortly before the markets crashed in response to the COVID-19 pandemic.

Firms trying to detect Insider Trading using just transactional and market data and relying solely on price movements could potentially open the door to a flood of false positives. Utilizing a complementary news feed on the other hand, allows firms to compare trading activities against the news feed. For example, an abnormal amount of trading activity on a share issue prior to a publicly announced event could be evidence of insider trading or other nefarious activities. In a recent Insider Trading case involving Goldman Sachs’ investment banker, Bryan Cohen, pay-as-you-go phones, and cash were used to evade communications monitoring, however, monitoring trading activity against corresponding news feeds meant the Insider trading could be identified. This case demonstrates how important relating trades to news events can be for a robust approach to detection.

So, why are more firms not adopting this practice, especially when incorporating this data can significantly improve the accuracy around the detection of insider trading? We believe that one of the key challenges in using any news service is integration with the market surveillance application. AtKRM22 we have removed this burden for our customers by integrating our news service fully with the KRM22 Market Surveillance solution, removing the need for costly technology projects.

Leveraging analytics derived from partner data sources such as LexisNexis®, KRM22 users can discern trends from public company announcements and corporate actions across the globe. Transactional data is brought together with reference and market data and news sources, before presenting it back to the customer in a meaningful way to help identify and pre-empt Market Abuse behaviors.

To find out more about KRM22’s News Service please reach out to Head of European Business Development, Dan Langley, at danl@krm22.com.

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