Bank of Eng­land dismissed tip-off about au­dio feed se­cu­rity breach

The Daily Telegraph - Business - - Business - By Rus­sell Lynch

BANK OF ENG­LAND of­fi­cials were first warned that hedge funds had paid for priv­i­leged ac­cess to press con­fer­ences a year be­fore the is­sue erupted into a pub­lic scan­dal, a re­port has found.

Thread­nee­dle Street failed to prop­erly ex­am­ine 2018 tip-offs about mis­use of an ul­tra-fast au­dio feed which gave traders early record­ings of Bank press con­fer­ences, ac­cord­ing to an in­ter­nal in­ves­ti­ga­tion.

In De­cem­ber last year, the Bank was en­gulfed by a furore over Statisma News, which sold ac­cess to an au­dio feed in­stalled at the in­sti­tu­tion’s of­fices by an af­fil­i­ate firm, En­coded Me­dia.

This au­dio-only feed de­liv­ered mar­ket sen­si­tive press con­fer­ence cov­er­age to sub­scribers, sec­onds ahead of a video stream used by other ob­servers. It po­ten­tially gave a cru­cial ad­van­tage to high-fre­quency traders deal­ing in cur­ren­cies and bonds. In their re­port pub­lished yes­ter­day, in­ves­ti­ga­tors said: “With the ben­e­fit of hind­sight, this mis­use by a third party sup­plier of the Bank’s au­dio feed could have been iden­ti­fied sooner by the Bank”.

In late 2018, an “ex­ter­nal party” raised spe­cific con­cerns with the Bank over En­coded Me­dia’s use of the feed.

The re­port said: “This was not fully in­ves­ti­gated be­cause it was not con­sid­ered pos­si­ble in the Bank’s press con­fer­ence en­vi­ron­ment. This was based on the Bank’s un­der­stand­ing of the facts, but it was in­cor­rect.”

Of­fi­cials dismissed the claim even though En­coded had asked the Bank to en­sure its au­dio feed was ac­tive dur­ing press con­fer­ences af­ter this was in­stalled in 2017. The Bank also ad­mit­ted that it was slow to mon­i­tor so­cial me­dia ad­verts advertisin­g “in­ap­pro­pri­ate ac­cess” to its press con­fer­ences, de­spite mes­sages cir­cu­lat­ing on Twit­ter boast­ing of Statisma’s speed ad­van­tage over other providers.

En­coded’s con­tract was can­celled in the wake of the scan­dal, but a spokesman de­clined to com­ment on whether any Bank staff had been dis­ci­plined or dismissed over the breaches.

The in­ves­ti­ga­tion found re­spon­si­bil­ity for press con­fer­ences was split be­tween the cen­tral bank’s tech­nol­ogy, com­mu­ni­ca­tions and se­cu­rity di­vi­sions, and said there was a lack of clar­ity over their in­di­vid­ual roles and re­spon­si­bil­i­ties.

The Fi­nan­cial Con­duct Author­ity also in­ves­ti­gated the se­cu­rity breach af­ter be­ing alerted by the Bank but has now ended its in­quiry. The City watch­dog said: “We do not be­lieve the au­dio feed con­tained any in­side in­for­ma­tion, nor have we found any ac­tiv­ity of con­cern or mis­con­duct.”

The Bank has now set out a series of its own rec­om­men­da­tions for fu­ture con­duct in­clud­ing main­tain­ing a “de­tailed” in­ven­tory of third-party IT equip­ment on site, sub­ject to se­cu­rity re­views.

It will also make more ef­forts to re­spond to firms advertisin­g “in­ap­pro­pri­ate ac­cess” to Bank in­for­ma­tion and con­sider po­ten­tial la­tency – or speed – is­sues in fu­ture pub­li­ca­tions.

Sep­a­rately yes­ter­day, the Bank’s chief op­er­at­ing of­fi­cer Joanna Place ad­mit­ted it was un­likely to meet di­ver­sity tar­gets. Women hold 32pc of se­nior man­age­ment roles at the Bank, be­low the tar­get of 35pc by the end of this year. They also make up 46pc of other po­si­tions, com­pared to a year-end tar­get of half.

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