Published by the Australian Financial Markets Association in the Policy and Markets Brief, March 2016.

The taskforce has identified a number of risk areas relating to the handling of confidential information and the management of conflicts of interest. These risks are being tested through a review of policies and procedures, meetings with intermediaries and a review of specific transactions.

Risk areas we have identified include: 

Research

• research analysts who come into possession of non-public information and pass it to preferred clients or other parts of the intermediary (including in research reports), and
• the potential lack of independence, including when initiating coverage, valuing companies and involvement by research analysts in securing corporate mandates.

Staff and principal trading

• staff and principal trading ahead of research coverage or capital raising transactions
• staff and principal participation in capital raising transactions which the intermediary is advising on, to the exclusion of bids from clients, and
• trading contrary to research by people with influence over research decisions.

Corporate transactions

• interactions between intermediaries’ corporate, research and sales teams without appropriate wall crossings or Chinese wall arrangements, and
• non-corporate staff discussing capital raising transactions with corporate clients where they have not been wall crossed. 

Intermediaries should review their process and controls for handling confidential information. These can be broadly categorised as behavioural, structural, procedural, disclosure and certifications, monitoring or review controls.

We propose to discuss these controls further in any new guidance we publish.