Avoiding the Headlines: How Financial Services Firms Can Implement Programs to Prevent Insider Trading

June 2011
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Avoiding the Headlines: How Financial Services Firms Can Implement Programs to Prevent Insider Trading

At a glance

For financial services firms, the consequences of an employee, officer, or director being accused of insider trading can be highly damaging. Learn how to review programs and controls to protect your business.

Insider trading has become a top priority of prosecutors, with increased cooperation among civil and criminal regulators, both in the United States and abroad. Recent civil and criminal investigations have implicated all types of firms, including hedge funds, mutual funds and other types of asset management firms, banks, broker-dealers, public companies, law firms, and accounting firms.

For traders and tippers, the consequences of insider trading can be serious and can include jail time, financial penalties, and being barred from the industry.

For financial services firms, the consequences of an employee, officer or director being accused of insider trading can be highly damaging—and can destroy client, investor, and public trust in the firm.

While it’s good business, the law also requires firms to have robust compliance, supervisory, surveillance and control measures in place to prevent and detect possible illegal insider trading. Regulators can bring enforcement action for the failure to have an adequate insider trading prevention program—even if no insider trading has occurred. With insider trading a top priority, leading firms are reviewing their existing protocols to prevent insider trading, and making changes.