At a roundtable event recently hosted by White & Case in London focusing on the issue of the handling of material non-public information (MNPI) by participants in the debt markets, Dilwyn Griffiths, Head of Market Monitoring at the UK's Financial Services Authority, spoke about the FSA's supervisory approach and of the FSA's priorities in relation to this area going forward. Although it seems that no significant shift in regulatory approach is on the horizon, the FSA is focusing on monitoring the debt and credit markets and is interested in the systems and controls of firms involved in such markets.
A recently issued discussion paper from the FSA considered some of the issues arising from participation in the debt components of a leveraged finance structure. Where the participants in such debt are also involved in the trading of any related instruments, or where such participants are involved in subsequent rounds of public market fund raising, it has been suggested that the involvement in both public and private markets could increase the participant's vulnerability to committing market abuse.
Going forward, the FSA has stated that it will be monitoring the progress of industry initiatives to establish principles and recommendations regarding the handling of MNPI by credit market participants. There have been various such initiatives of late. One recent joint statement by various worldwide trade associations reaffirmed the collective commitment by the members and financial markets represented by the associations to promote fair and competitive markets in which inappropriate use of MNPI is not tolerated. Another European trade association has been calling for issuers to disclose publicly certain information made available to lenders, so that it is also available to holders of non-investment grade debt securities.
The FSA has recently consulted on the status, and possible recognition, of industry guidance going forward, consistent with its stated move towards so-called "principles based" regulation. In practice, this should mean fewer detailed and prescriptive FSA rules. It will be interesting to see how this area develops and whether, in due course, the various pieces of trade association guidance will become potential candidates for regulatory recognition.