"Firms are asking more questions before taking on new clients or undertaking transactions"
The STOR regime requires market participants to identify and report suspicions of potential market abuse to the FCA.
Since 2016, the regulator had seen an annual increase in the number of STORs, however figures for 2019 show the first decrease in the total number of reports.
During 2019 the FCA received 5,455 reports of potential insider dealing (4,623) or market manipulation (822). This compares favourably with the 5,926 reports received in 2018. More than 600 reports were recorded in November while the vast majority were for transactions in equities.
The financial watchdog cited a number of possible reasons for the reduction, including a more robust approach to tackling financial crime among some regulated firms following the publication of the FCA's Financial Crime Guide in December 2018.
The steps taken by some firms included more stringent reviews of clients' suitability when they have been the subject of a STOR and restricting their access where appropriate. "We believe these restrictions have resulted in less suspicious activity being facilitated by these firms and consequently a reduction in STORs," the FCA stated.
And where the number of STORs rose in 2019, in the commodity and fixed income markets, the FCA cited improved detection capabilities among market participants and encouraged them to "continue developing surveillance capabilities".
Ian Mason, head of UK financial services regulatory team at Gowling WLG, said: "This shows that the FCA's tougher approach towards financial crime is beginning to pay off. Firms are asking more questions before taking on new clients or undertaking transactions, and the FCA has fined some firms who did not have adequate market abuse systems and controls. STORs are a key information source for FCA investigations."
