Bankers working from their kitchens or bedrooms may raise new risks around handling sensitive information, which has been heightened by the prospect of big debt and equity fundraisings from companies, Britain's financial watchdog said.
As a result, financial firms need to be on watch to prevent any misconduct or sharing of insider information.
"In response to the crisis, we anticipate many issuers will need to seek additional capital, leading to an increase in primary market activity. This, coupled with alternative working arrangements, will make it as important as ever that the right controls around market abuse, conduct, and managing conflicts of interest are in place," the Financial Conduct Authority said in its latest market newsletter, issued on Wednesday.
"Given market uncertainties and changed working arrangements, issuers need to be extra vigilant about the possibility of leaks and rumours, and identify whether there has been a breach of confidentiality," it said.
Since mid-March, thousands of equity and bond traders have been working from home or back-up sites due to the coronavirus pandemic as lockdown and social distancing rules have left offices largely empty in London.
At the same time, companies have raised billions of pounds from selling bonds and are expected to continue raising large sums from bond and equity issues to shore up their finances in the face of deep UK and global recessions.
The FCA said banks, brokerages and issuers must be aware that their employees working from home raises new, additional risks around identifying and handling inside information on capital raisings. The increase in capital markets activity "potentially gives rise to increased amounts of inside information, which needs to be appropriately controlled", the watchdog said.
"During this period, we encourage a particular focus on maintaining robust market surveillance and suspicious transaction and order reporting by relevant market participants."
Misconduct could undermine investors' confidence and willingness to support companies raising new capital, and could also expose issuers to significant reputational risk, it said.
The regulator also warned that due to the pandemic, the nature of information that is considered material may change and shift what constitutes inside information.
That could include, for example, details about access to finance and funding from government schemes, changes in cashflow patterns, changes to contracts, a firm's ability to continue or resume business, or changes in supply chains.
The use of "wall-crossing" is important for capital markets transactions, but the FCA warned that firms need to strictly control the inside information that is disclosed and received. Market participants should maintain appropriate records of their interactions through recorded lines or written minutes, it said.
The regulator has already warned banks not to use their lending relationships to exert pressure on corporate clients to secure roles on equity mandates.
"Firms should compete on the merits of their services and terms rather than imposing undue pressure on issuers or restricting their choice," Wednesday's bulletin said.
The FCA said it may ask market participants to explain how they are meeting their regulatory obligations, and would use its enforcement powers where necessary.
Common industry controls such as a mandatory two-week holiday for front-office staff may be appropriate, it added.