The European Securities and Markets Authority says that national regulators are failing to force banks to handle suspicious transactions and order reports (STORs) properly in accordance with the Market Abuse Regulation (MAR).

A report that ESMA has just published says that suspicious transaction and order reporting has increased but adds that national regulators should do more to improve reporting, the better to tackle market abuse.

Persons professionally arranging or executing transactions, investment firms and trading venues are obliged to send STORs to their regulators, which in turn scan them for signs of insider dealing and market manipulation.

After the entry into force of MAR in mid-2016, regulators received 10,653 STORs in 2017 and 11,130 in 2018 - a far cry from the mere 4,634 reports that they received during the final year of the Market Abuse Directive. In addition, in 2018 they received 1,560 other notifications of alleged market abuse, such as complaints from consumers and tip-offs. In both 2017 and 2018, 80% of all STORs came from investment firms with clients, most of them HNWs.

ESMA wants regulators to step up STOR supervision. Its so-called 'peer review' assessed all 31 regulators in six areas related to STORs. Most of them are good at analysing the reports for signs of market abuse but ESMA wants them to do more to ensure that all financial firms subject to the STOR requirements are complying and to root out non-reporting/poor-reporting of STORs, with dire punishments where appropriate.

The super-regulator says that the regulators of Belgium, France, Holland, Italy, Portugal and the United Kingdom were doing well. Eleven are partially compliant (Austria, Bulgaria, Greece, Iceland, Ireland, Latvia, Liechtenstein and Luxembourg) or non-compliant (Cyprus, Norway and Romania) in their supervision of the STOR requirements by certain financial firms. Thirteen are partially compliant (Croatia, Denmark, Estonia, Greece, Iceland, Latvia, Lithuania, Malta, Poland, Romania and Slovakia) or non-compliant (Cyprus and Liechtenstein) in their responses to bad or non-existent reporting.

The 'peer review' took the form of a self-assessment questionnaire that ESMA sent to the 31 regulators under its control. It followed this up with on-site visits to six of them(Germany, Greece, Ireland, Italy, Romania and Sweden). It will talk to each transgressor individually.

STORs from relationship managers

Almost all STORs relate to equity transactions and the UK accounts for 60% of these in the EU. The UK also generated 52% of all STORs in 2017. The only faults that ESMA finds with the UK are its slight tardiness in sending STORs to the other regualators in the EU and the way in which it collects some statistics.