SFA Update: Dealings with undisclosed principles

United Kingdom
In Board Notice 500, SFA have reminded firms of their existing obligations when undertaking programme trading, which is a series of transactions effected by an institution when it acquires or disposes of an entire portfolio, a material part of a portfolio, or a basket of at least 20 stocks, whether or not trading as principal or agent.

SFA has explained that, under Principle 6, which governs conflicts of interest, firms are prevented from dealing ahead of the designated strike time for a programme trade unless, exceptionally, it has obtained informed consent from its customer. In addition, the 'best execution' rules apply to each individual transaction executed in a programme trade unless best execution has been waived by the customer, or the terms of the transaction involve there being a 'guaranteed' trade.

This guidance follows an investigation by SFA into programme trading carried out in 1996 by SBC Warburg on behalf of Kleinwort European Privatisation Investment Trust.