corona virus

Data Shows Coronavirus’ Impact on Compliance

By Jean-Marc Levy, CEO

Over the past two weeks, the Coronavirus’ (COVID-19) global presence has seen enormous growth. As the number of cases continues to exponentially increase, businesses are considering the virus’s potential impact on the well-being of employees, clients, and overall firm operations. In an effort to protect employees and reduce operational risks, many firms are implementing business continuity plans and are establishing new policies such as remote work or limits on non-essential travel. 

At ComplySci, we are seeing that the Coronavirus’ effect on market volatility has had a parallel impact on compliance, as teams try to stay ahead of heightened trade activity.

The stock market began experiencing drops in share prices during the market opening on Tuesday, February 25th, as confirmed cases of the coronavirus outside of China continued to grow exponentially. During times of market turbulence, historically we have seen trading activity increases as individuals seek profitability or manage risk. This trend has continued during the coronavirus outbreak. During the week of February 23rd, trade preclearance requests submitted in the ComplySci platform increased by 110% compared to the previous week. Similarly, ComplySci saw an 123% increase in executed trades the week of February 23rd compared to the prior week. This trade volume continued into the week of March 1st, with preclearance and execution numbers nearly as high as the week of the 23rd.

When trading volume increases, Compliance teams must be especially diligent in ensuring employees are complying with regulations and firm policies; but without the right tools in place, cross-referencing employee preclearance requests can be time-consuming and is at risk of human oversight. In fact, according to the CCO of a New York based hedge fund, without an automated compliance solution, “it is very difficult, if not impossible, to accurately and reliably pick up all discrepancies between what employees are reporting as opposed to what they are actually doing.” This is especially true during times of hyper-activity when employees are executing more transactions than normal.

The coronavirus has impacted many organizations – ranging from the drafting of precautionary business policies to serious implications stemming from direct exposure to the virus. In all manners, this serves as a critical reminder of the need for Compliance teams during such times of high volatility and market uncertainty. Read news updates from the CDC here.