Insider Trading: A Quick-Start Guide to Compliance


All too regularly, we see headlines of another case of insider trading; a recent list of offenders that includes everyone from Goldman Sachs employees to football players. Compliance industry professionals are aware that insider trading laws are complex and vary significantly from country to country. The extent of enforcement also varies from one country to another, with penalties that could cost businesses millions.  Prevention of insider trading begins with the implementation of adequate policies and procedures, along with the development and maintenance of comprehensive records to ensure regulatory guidelines are met.

What Should Insider Trading Policies Include?

Management should adopt personal trading polices for employees and ensure that such polices are distributed and reviewed regularly, especially by covered persons.  Adequate policies and procedures will specially address permissible and restricted employee trading activities and include the following:

  • a definition of ‘covered persons’ and ‘covered securities’ as they apply to the firm
  • adoption of pre-clearance procedures that ensure that all covered employees obtain permission prior to placing a trade in a covered security
  • new employee reporting requirements (i.e. new employees must report holdings within 10 business days of starting the position)
  • ongoing employee reporting requirements (i.e. periodic holding reports and monthly/quarterly brokerage statements)
  • a requirement that all employees disclose and attest to personal trades on a quarterly basis; while covered persons maintain a full list of accounts and the accounts of all direct family and those individuals over whom they have discretionary authority
  • a process of regularly reviewing employee compliance of pre-clearance procedures and restricted investments, as well as checking for correlations between employee trading activities and major news stories that impact the movement of a particular security

 What Information Needs to Be Documented?

In addition to the above, specific requirements have been outlined by regulators that expect firms to document and maintain detailed records pertaining to the sharing of material non-public information (MNPI). Management must ensure that appropriate recordkeeping procedures are in place, including who is privilege to the MNPI, when the information is shared, and how long it is to be considered MNPI.

How Can Businesses Ensure Adequate Records Are Maintained?

It is typical for various records to be documented and kept with manual spreadsheets, which can be difficult to update and guarantee complete accuracy. My ComplianceOffice allows users to create, access and maintain comprehensive records and to ensure that internal policies and regulatory requirements are met seamlessly and efficiently. 

 Read more about MCO’s insider trading compliance tools here: Insider & MNPI Management