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The New Mantra for Market Conduct Compliance

By March 31, 2018October 7th, 2021No Comments


♦The Market Conduct Mantra♦

In a recent issue of his Bridging the Week newsletter, Gary DeWaal coined this mantra:

“Training, training and more training — and make it specific!”

DeWaal, Special Counsel with Katten Muchin Rosenman LLP, was referring to the need for market conduct training in the wake of recent “failure to supervise” regulatory actions against firms whose employees engaged in disruptive trading paractices.

After citing two recent settlements, DeWaal summed up the the regulatory climate this way: “Although it is very impracticable to meaningfully train employees on the intricacies of each exchange’s rules, it appears increasingly advisable that firms at least affirmatively identify any unique prohibitions or requirements of particular venues in core compliance procedures and/or training materials, as well as generically describe applicable regulatory prohibitions and requirements (e.g., no wash trades, no spoofing). Employees should be advised how to access each trading venue’s particular rules and guidances.”

While there’s no safe harbor here, DeWaal pointed out that “CME Group has also indicated that, despite its capability to file charges against an employer saying that it is strictly liable for the wrongful acts of its employees and agents, it may not to seek to levy a penalty where the employer has engaged in meaningful supervision of its employees – even where the employees may also have engaged in disruptive trading practices.”

At the heart of “meaningful supervision” is training, and our Market Conduct course covers today’s most relevant topics: Spoofing, messaging violations, wash sales, market manipulation, pre-arranged trading, non-competitive trading, front-running, insider trading and more.

Exchange Analytics’ Training Perspectives Newsletter brings you important issues from compliance professionals. EA can help with your compliance training needs for Anti-Money Laundering, Customer Protection Rule, Cybersecurity, Ethics, Identity Theft Prevention, Market Conduct and Non-Competitive Trading. Learn more today.

Gary DeWaal is Special Counsel with Katten Muchin Rosenman LLP in its New York office focusing on financial services regulatory matters. He provides advisory services and assists with investigations and litigation. View the current Bridging the Week newsletter here.