There are many instances where the employees of investment firms and companies are in possession of confidential information. It is a requirement of the Market Abuse Regulation (MAR) is a law that prohibits the use and making use of such information to gain the “unfair advantage”.
Another factor to consider for investment companies is Article 20 of MAR, which requires people who make investment recommendations to declare any conflicts of interest and conflicts of conflict of interest during their job. To avoid the misuse of information obtained from insiders to one’s advantage as well as conflicts of interest it is essential to have a thorough employee-trader pre-clearance system.
If you look at the costs of non-compliance, it is evident why it is vital to strengthen the pre-clearance procedures. There are Market Abuse Regulation penalties for not disclosing possible conflicts of interests when making investment recommendations can be the maximum of EUR 500,000 in case it is a natural individual as well as EUR1,000,000 for legally-authorized entities while the fines for insider dealing could be the sum of EUR5,000,000 for one person , and up to 15 million euros or 15 percent of the annual turnover from the last accounts available for a company.
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