Recently, the U.S. Securities and Exchange Commission (SEC) made waves when it filed virtually back-to-back insider trading charges. On Mar. 30, 2023, the SEC filed insider trading charges against a former Canadian asset management firm trader and a former US broker-dealer partner. Only a few months later on Jun. 29, 2023 the SEC filed insider trading charges against a registered representative, and, controversially, a chief compliance officer. The following month on July 26, 2023, the SEC filed insider trading charges against an investor.
And such public insider trading charges like these have had significant effect on how compliance professionals are evolving their regulatory compliance programs. During a recent webinar, hosted by COMPLY, the audience of compliance professionals serving financial advisory firms was polled about whether recent headline-making insider trading charges caused them to reassess their firm’s MNPI policies and procedures. The results?
Yes – 41%
No – 59%
What your firm can do to avoid insider trading charges and protect its MNPI
The rigorous enforcement of insider trading rules by regulators like the SEC underscores the vital role comprehensive compliance programs play in preserving the integrity of the financial sector.
Here are some tactics your firm can adopt to safeguard against insider trading violations:
- Develop comprehensive policies.
Craft meticulous policies and protocols aimed at actively monitoring and identifying suspicious trading activities, particularly those involving employees with access to MNPI.
- Collaborate for robust security.
Foster a close collaboration between your compliance and IT teams to establish formidable access controls and data security measures. This entails implementing potent authentication methods, encryption protocols and vigilant monitoring systems to swiftly spot unauthorized access or questionable transactions.
- Strengthen communication controls.
Establish stringent controls over communication channels, heightening awareness among employees about the inherent risks tied to using these avenues for sensitive business exchanges.
- Regularly evaluate existing controls.
Regularly evaluate the effectiveness of your existing controls, pinpointing potential vulnerabilities within your insider trading prevention framework. Upon identifying any gaps, take immediate corrective measures to rectify the situation.
- Regularly offer training.
Deliver targeted, current and consistent training to all personnel on the intricacies of insider trading regulations. Emphasize the significance of upholding confidentiality and the range of MNPI categories they are tasked with safeguarding.
- Cultivate a culture of compliance.
Foster an environment that encourages and enables employees to not only comply with your firm’s policies regarding MNPI but also promptly report any apprehensions or suspicions regarding possible violations. This proactive approach can prove instrumental in identifying and addressing issues swiftly.
Proactive measures like these can help protect MNPI, avoid insider trading charges and meet regulators’ expectations.
With the pace of the SEC’s proposed and finalized regulations, now is the time to lean into your resources and away from potential fines. Learn more about the COMPLY consulting services and solutions, and how we can help your firm prepare for an SEC audit, update your policies and procedures and more!