instances where individuals within regulated firms, who believe the client is more likely than not to make a profit, ‘follow’ the behaviour of their clients either by trading on their own account, or by giving tips to other clients or friends
Some clients may be unusually successful in their trading. Employees of regulated firms may decide to follow their clients' positions with the hope of realising profits. It may be because they have observed that the client’s trading tends to be highly successful – perhaps suspiciously so, including where STORs have been filed about that client in the past - or because there is sudden demand from a large number of clients for a particular stock – which cannot be explained by publicly available information. There is also a risk that the client has indicated or suggested that they have inside information (see insider dealing) when placing the trade.
Effective implementation of surveillance alerts for following requires capturing the following trade data:
trade and position
client trades and positions
market prices and volumes
reference data to identify market moving news (potential inside information)