GRSS Insights

The past few weeks have been eventful for regulators on both sides of the Atlantic. The Securities and Exchange Commission (SEC), BaFin and the Swedish Financial Supervisory Authority (Finansinspektionen) have taken measures against traders for claims of market abuse pertaining to inside information as well as market manipulation. Also, the FCA has announced a renewed commitment to pursuing market abuse. 

With regards to charges of insider trading, the SEC has charged a former Goldman Sachs compliance analyst with dealing ahead of multiple corporate events using non-public information obtained through his position at the bank. Mr. Sanchez had access to highly sensitive information regarding the mergers and acquisitions of various of the banks’ clients, and made more than $471,000 through his scheme. Trading based on insider information yields the trader an unfair advantage as the potentially price-moving information is not yet public. Sanchez is being investigated despite his cover-up efforts of limiting order size and using different accounts under different names.   

In Germany, BaFin, in a rare showing, publicly criticised large online bank ING Germany for taking too long to report on suspicious activity pertaining to the insider dealing case of a former senior funds manager at Union Investment. The BaFin employee spoke of this during the funds managers’ trial, where the funds manager admitted to trading ahead of corporate events on multiple occasions, making Eur 8.1 million in profit, while using a brokerage account at ING Germany to accomplish the trades. Although BaFin did not explicitly mention ING Germany during the trial, the former funds manager’s broker was made known in the course of the case. The accused was sentenced to over three years in prison and fined six times the profit he made.  

Also, on the charge of insider dealing, in Sweden, the Finansinspektionen opened an investigation into EQT AB, a large private equity company. A lock-up agreement was stipulated within the company’s IPO arrangement two years ago. Nevertheless, executives were allowed to sell their shares a year in advance, following a revision of the aforementioned lock-up structure. Earlier in September, company investors have expressed their discontent regarding the recent lock-up adjustments, which involve the sale of equity valued at $2.7 billion. The decision of the Swedish regulator to proceed with the investigation was based on suspicion of insider information which EQT AB did not publish in a timely manner. 

Market manipulation has also been in focus, with the SEC charging two traders for wash trades in ‘meme stocks’. These equities are known to experience high volatility, resulting from their promotion to retail traders via social media (such as GameStop). Wash trades are dealings, in opposing directions, within a very short timeframe that have no specific rationale. These trades unsettle the share price of equities and create brokerage fees, some of which are passed back to the customers. The two charged investors were dealing in out-of-the-money put options during the first two quarters of 2021, using broker-dealer accounts to make a profit of nearly $700k in liquidity rebates. 

Also suspecting manipulation, BaFin filed a criminal complaint against Northern Data, only a day after Northern announced its 2020 financial results. According to the Financial Times, the allegation relates to “a potentially misleading ad hoc release that was published by the company in November 2019” which potentially overstated the value and significance of Northern’s acquisition of US-based Whinstone. 

Echoing its institutional counterparts’ approach, the UK financial regulatory body is implementing tougher measures in dealing with market misconduct. FCA CEO Nikhil Rathi explained that the FCA is working on past criticism for not acting promptly and being too risk-averse. Indeed, throughout the past few weeks the FCA has continued to publish issued warnings for such abuse, underscoring this mission. 

The regulators’ continuous efforts to perform such investigations, irrespective of the transactions’ size, show that investors need to prove that their deals are transparent and in line with their trading strategy. Regulated firms need to ensure that they have the right employees and tools to perform internal trading surveillance. GRSS provides an outsourced monitoring and surveillance service, assisting firms in implementing a robust internal infrastructure to monitor investment transactions and electronic communication. 

Sources: 

SEC Charges Investment Bank Compliance Analyst with Insider Trading in Parents’ Accounts and Obtains Asset Freeze, Link: https://www.sec.gov/news/press-release/2021-203  

BaFin points to ING Germany’s tardy response in multimillion euro insider-trading case, Link:  https://www.ft.com/content/e6357aad-16d0-4c05-ad58-65e7dc440133  

FI opens investigation into EQT AB, Link: https://www.fi.se/en/published/news/2021/fi-opens-investigation-into-eqt-ab/  

Securities and Exchange Commission v. Suyun Gu, et al., No. 1:21-cv-17578 (DNJ filed Sept. 27, 2021), link: https://www.sec.gov/litigation/litreleases/2021/lr25224.htm 

German regulator files criminal complaint against Northern Data staff, Link: https://www.ft.com/content/498a9ff3-5207-42ed-a451-61f5a25af68e  

Seizing opportunity – challenges and priorities for the F.C.A., Link: https://www.fca.org.uk/news/speeches/seizing-opportunity-challenges-priorities-fca 

Warning Notice Statement 21/1, Link: https://www.fca.org.uk/publication/warning-notices/warning-notice-statement-21-1.pdf

Nic Image

Nicholai Cumbo
Surveillance Analyst

Nicholai previously held the position of Senior Risk Officer at ACA Mirabella, where he was responsible for on-boarding clients, managing relationships and reviewing clients’ investment processes, risk management processes, strategy complexity, and operational arrangements. He was responsible for compiling and submitting data for Regulatory Reporting. 

After graduating with a B.Sc. in Mathematics and Physics, he transitioned to finance, by completing a post graduate certificate in the Mechanics of Risk Management. He followed this up by sitting for the FRM and became a Certified Financial Risk Manager.

Eliz

Elizabeth Mallia
Surveillance Analyst

An awardee of the Marie Curie Actions scholarship, Elizabeth built up her data crunching and analytical skills in theoretical motor neuroscience where she investigated brain mechanisms in action initiation at the Institute of Neurology, University College London.

She transferred her skillset to financial services in 2017, where she formed part of a formidable risk team at the regulatory hosting platform, ACA Mirabella. There she held the position of Senior Risk Associate, where she concentrated on risk management for funds with model-based strategies, focusing primarily on insurance-linked security investments. As part of the same role, Elizabeth worked with a subsection of the team on consolidating and improving the surveillance framework for potential market abuse of the platform’s diverse clientele, promoting an evidence-based approach in the set-up of the framework. 

Having also previously had the opportunity to study and work at various neuro-research institutions, including Karolinska Institutet, Stockholm and Radboud UMC, Nijmegen, Elizabeth brings multi-faceted experience in breaking down complex problems to facilitate custom solutions.

RF

Ryan Farrugia
Surveillance Analyst

Ryan most recently held the position of Senior Risk Associate at ACA Mirabella, where he was responsible for reviewing clients’ investment processes, risk management processes, strategy complexity, and operational arrangements. He was responsible for monitoring clients’ trading activities daily, including risk/trading limits. Ryan was also involved with the creation of the Governance Risk Compliance Operations Unit within the company. 

After graduating with a Bachelors’ Degree in Commerce, a Post Graduate Certificate in Finance, and a Master’s Degree in Investment and Finance, Ryan spent over two years at APS Bank in Risk Management and Finance.

TJ

Tim Jukes
Senior Surveillance Analyst

For the last five years, Tim held the position of Senior Compliance Consultant at ACA Mirabella overseeing a wide range of complex and large firms on the hosted platform. 

Tim began his career at Price Waterhouse in 1986, where he qualified as a Chartered Accountant. Following qualification, Tim transferred to Hong Kong, where he spent 5 years specialising in the audit of multinational trading and finance entities. Tim spent 18 months on secondment at the Hong Kong Securities and Futures Commission developing an inspection regime for asset managers and advisers. 

On returning to the UK, Tim spent 3 years at IMRO, a predecessor to the FCA, specialising in asset management supervision. Tim subsequently undertook several senior in-house compliance and finance roles across a range of start-up and large asset managers specialising in open-ended funds and, subsequently, private equity. Tim then moved into compliance consulting with Cordium and more recently spent 5 years working at ACA Mirabella overseeing a wide range of hosted clients.

PS

Paul Springer
Senior Surveillance Analyst

Paul held the position of Senior Compliance Consultant at ACA Mirabella, where he was responsible for monitoring some of the largest clients and most complex served by Mirabella. He is a compliance professional with 25+ years of regulatory experience. 

At ACA Mirabella, as well as implementing a compliance infrastructure at each client and conducting ongoing compliance reviews, Paul’s role encompassed oversight and review of clients’ electronic communications (employing Fingerprint) and their staff members’ personal compliance interactions (utilising Compliance ELF). 

Paul spent 5 years at the FCA (then the FSA) as the Manager of a Corporate Authorisation team, followed by approximately 20 years of compliance experience in the financial services industry. He has worked in-house and held the Compliance Officer and Money Laundering Reporting Officer roles for approximately 12 years, firstly at a broking firm which he joined at start-up, and then a hedge fund manager. Paul also spent over 3 years working at a leading compliance consultancy, providing compliance support to clients (including full-scope and sub-threshold AIFMs, investment managers and advisers).  He is a qualified Chartered Accountant.

George

George Camilleri
Head of Risk & Operations

George worked at ACA Mirabella for the past six years as Head of Risk Operations and managed the Malta-based Risk Team responsible for all the Firm’s risk monitoring and regulatory reporting. 

He holds an MSc in Financial Mathematics from the University of Leeds, focusing on quantitative risk management, and a BSc in Mathematics and Physics from the University of Malta. He has also taken several short courses, including the Oxford Private Markets Certificate at the Saїd Business School.

In his free time, George volunteers for non-governmental organisations within the cultural sector in Malta, having an interest in the arts, classical music, and opera.

sarah

Sarah Donnelly
Head of Sales

Sarah recently left ACA Mirabella, where she held the role of Head of Sales. In this role, she was focused on the company’s growth, from targeting new business opportunities to nurturing existing client relationships.

Sarah is working towards the CIPD Foundation Certificate in People Practice.

fx-gs

Joe Vittoria
CEO

Joe was most recently the CEO and Founder of the Mirabella Group. During the eight years that Joe grew the Mirabella business, it became the recognised leader in regulatory hosting in the UK. As its CEO and an experienced Compliance Officer, he was responsible for ensuring regulatory compliance of Mirabella and its appointed representative clients. During his tenure at Mirabella, the firm fully and successfully complied with its regulatory obligations, which included the FCA (UK), MFSA (Malta), and the NFA/ CFTC (USA).

Mirabella conducted a thorough surveillance process across all its clients’ activities, which included over $19bn in assets under management, across over 50 investment mandates, managed by over 200 portfolio managers and traders. The investment strategies it hosted ranged from Private Equity and Real Estate to complex credit and derivative processes, with the majority in long/short equity.

Apart from his experience at Mirabella, Joe has acted as COO to other investment management firms, which included quant, debt and credit strategies. Before starting in the alternative investment management industry in 1998, Joe worked at Salomon Brothers which he joined in 1985, after graduating from Yale with a BA in Economics.