{"id":13131,"date":"2025-10-18T15:37:22","date_gmt":"2025-10-18T15:37:22","guid":{"rendered":"https:\/\/www.comply.com\/?post_type=resource_posts&p=13131"},"modified":"2025-10-18T15:38:51","modified_gmt":"2025-10-18T15:38:51","slug":"managing-employee-conflicts-of-interest-and-insider-information-in-private-market-firms","status":"publish","type":"resource_posts","link":"https:\/\/www.comply.com\/en-gb\/resource\/managing-employee-conflicts-of-interest-and-insider-information-in-private-market-firms\/","title":{"rendered":"Managing Employee Conflicts of Interest and Insider Information in Private Market Firms"},"content":{"rendered":"

Private markets have grown at an extraordinary pace over the past decade. In the UK alone, assets under management in private markets have<\/span> tripled,<\/span> and similar trends are visible across Europe and globally. <\/span>\u00a0<\/span><\/p>\n

This expansion has transformed private markets from traditionally institutional spaces into a more retail-accessible environment. However, with that growth comes an increasing level of <\/span>regulatory focus – particularly around conflicts of interest and the management of inside information.<\/span>
\n<\/span><\/p>\n

 <\/p>\n

<\/span>Why Regulators Are Turning Up the Heat<\/span><\/b>\u00a0<\/span><\/span><\/h2>\n

Private markets have historically operated wi<\/span>th less transparency th<\/span>an listed markets. Information flows are more restricted, valuation processes are more subjective, and oversight frameworks are often less formalised. Regulators have become increasingly concerned about how firms manage risks in these areas.<\/span>\u00a0<\/span><\/p>\n

Recent regulatory activity has included thematic reviews on private credit, the handling of inside information, and valuation practices within private market firms. A further review focused on conflicts of interest – both at the employee and fund level – is on the horizon.<\/span>\u00a0<\/span><\/p>\n

At the heart of these reviews lies one consistent theme: regulators want to ensure firms have robust frameworks for managing inside information and conflicts of interest. Each of these risks is distinct, but in private markets, they often overlap and amplify one another.<\/span>
\n<\/span><\/p>\n

 <\/p>\n

<\/span>The Interplay Between Market Abuse and Conflicts of Interest<\/span><\/b>\u00a0<\/span><\/span><\/h2>\n

Market abuse risk and conflicts of interest risk are deeply intertwined. Where information is limited and valuations are judgment-based, even small lapses in governance can have outsized effects.<\/span>\u00a0<\/span><\/p>\n

F<\/span>or example, if employees or investment teams have access to material non-public information (MNPI) about portfolio companies or transactions, this can create a risk of insider dealing or unlawful disclosure. A<\/span>t the same time, if those individuals hold personal investments or have other financial interests linked to the same assets, they <\/span>may face conflicts between personal benefit and professional duty.<\/span>\u00a0<\/span><\/p>\n

In short, poor management of conflicts often increases the risk of market abuse, and vice versa. A modern compliance framework must therefore treat these risks as connected, not isolated.<\/span>\u00a0<\/span><\/p>\n

 <\/p>\n

<\/span>Laying the Foundations: Risk Assessment and Proportionate Controls<\/span><\/b>\u00a0<\/span><\/span><\/h2>\n

Effective control begins with a <\/span>risk assessment. Firms should map their business models against applicable rules and expectations, <\/span>identifying where risks of inside information or conflicts may arise. <\/span>\u00a0<\/span><\/p>\n

A sound framework should then be built on proportionate, tailored controls, including:<\/span>\u00a0<\/span><\/p>\n

    \n
  • Personal account dealing oversight<\/span><\/b>, ensuring staff pre-clear trades, observe holding periods, and disclose broker accounts.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
      \n
    • Restricted and watch lists<\/span><\/b>, supported by clear wall-crossing and information-sharing procedures.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
        \n
      • Controls around inside information flows<\/span><\/b>, including folder security, audit trails, and a clear \u201cneed-to-know\u201d approach.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
          \n
        • Monitoring of outside business interests, gifts, and entertainment<\/span><\/b>, supported by a compliance system that gives transparency to potential conflicts.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
            \n
          • Consequences for breaches<\/span><\/b>, backed by a culture where compliance expectations are taken seriously at all levels.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n

            Training should reinforce these principles and focus on the specific risks that arise in private markets rather than relying on generic MAR concepts designed for public trading environments.<\/span>
            \n<\/span><\/p>\n

             <\/p>\n

            <\/span>Recognising Amber\u00a0Flags – and Acting Before They Turn Red<\/span><\/b>\u00a0<\/span><\/span><\/h2>\n

            Monitoring is not just about catching misconduct; it\u2019s about <\/span>spotting trends that signal weak understanding or poor adoption of policies. For example, very low volumes of disclosures or pre-clearance requests \u2013 whether they be related to client entertainment or personal account dealing – could indicate that employees are not declaring activity.<\/span>\u00a0<\/span><\/p>\n

            Likewise, a compliance breaches register showing<\/span> no recorded breaches may not always be good news – it could signal insufficient oversight or under-reporting. <\/span>Firms should review data holistically, considering whether controls are being used, understood, and enforced effectively.<\/span>\u00a0<\/span><\/p>\n

            A more proactive approach is also key. Waiting for red flags or regulatory\u00a0audits to expose weaknesses can be costly. Instead, firms should watch for <\/span>\u201camber flags\u201d –<\/span> early signs of misalignment or non-adoption – and address them before they escalate. Compliance policies only work if employees <\/span>understand and engage with them, not simply tick boxes.<\/span>
            \n<\/span><\/p>\n

             <\/p>\n

            <\/span>Three Practical Steps to Strengthen Frameworks<\/span><\/b>\u00a0<\/span><\/span><\/h2>\n
              \n
            1. Start with a robust, business-specific risk assessment.<\/span><\/b>
              \n Map information flows and employee roles to pinpoint where inside information and conflicts risks intersect.<\/span> <\/li>\n
            2. Build clear, tailored policies and controls.<\/span><\/b>
              \n Focus on the firm\u2019s actual activities – from valuations to co-investments – and make policies understandable, relevant, and easy to follow.<\/span> <\/li>\n
            3. Monitor intelligently and embed a culture of accountability.<\/span><\/b>
              \n Use data, systems, and breach analysis to identify trends early. Reinforce expectations through leadership example, training, and consistent enforcement.<\/span>\u00a0<\/span><\/li>\n<\/ol>\n","protected":false},"author":20,"featured_media":12931,"menu_order":0,"template":"","resource_type_tax":[160],"delivery_method_tax":[],"certification_tax":[],"class_list":["post-13131","resource_posts","type-resource_posts","status-publish","has-post-thumbnail","hentry","resource_type_tax-blog-article"],"acf":{"resource_description":"","resource_button":"","resource_date":"","include_bdt_time":false,"resource_location":"","is_press_release":false,"form_headline":"","form_id":"","is_paywall":false,"newsletter_type":"global","resource_feed_group":{"show_section":false,"section_headline":"","more_link":"","use_recent_resources":true,"resources":false},"resource_feed_clone":{"resource_feed_group":{"show_section":false,"section_headline":"","more_link":"","use_recent_resources":true,"resources":false}},"gate_this_content":false,"form_embed":"","introduction":"","full_content_":"","accordion_group":{"show_section":false,"accordion_style":"image","section_subhead":"","section_headline":"","section_text":"","accordion_1_headline":"","accordion":false,"accordion_2_headline":"","accordion_2":false},"new_blue_header":false},"yoast_head":"\nManaging Employee Conflicts of Interest and Insider Information in Private Market Firms | Comply<\/title>\n<meta name=\"description\" content=\"With the growth of private markets comes increased regulatory focus - 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