A recent case in Hong Kong has sent a clear signal to financial firms about the dangers of failing to manage material non-public information (MNPI) effectively. The Market Misconduct Tribunal (MMT) ordered the wife of a chauffeur to disgorge $106,968 in illicit profit gained from the insider dealing activity.
The incident involved the chauffeur who worked for the family of a chairman in possession of MNPI about a corporate takeover at the material time. This person used his inside knowledge to counsel or procure his wife to trade shares, turning a profit after the takeover was publicly announced.
The MMT also sanctioned the chauffeur and his wife, issuing cold shoulder orders for 16 months, cease and desist orders, and an order to pay the costs and expenses incurred by the government and the SFC. The cold-should order prohibits the couple from trading in Hong Kong for the specified time.
Staying Within the Lines of Compliance
The misuse of MNPI is a significant regulatory and reputational risk for financial firms. Authorities are increasingly vigilant, holding firms accountable for ensuring their employees and connected persons do not use confidential information for personal gain. Without robust controls, firms risk drifting into regulatory penalties, reputational damages, and loss of client trust.
This case serves as a reminder that insider dealing can happen when sensitive information is insufficiently protected. Firms must adopt proactive measures to prevent the inappropriate dissemination and use of MNPI. In particular, effective training to those with Inside information about how to control access.
Keeping Compliance on Course with RegTech
Every firm should maintain a list of people with access to MNPI, called an “insider list”. These lists can include employees and anyone outside the organisation who has access to insider information, such as contractors, advisors, accountants, and other resources who may come in contact with MNPI during business dealings.
Records should maintain accurate information about these people’s contact details, why they are on the insider list, and dated additions and changes to the list. Firms should also detail the removal of individuals from the list to provide evidence of when they stopped being in possession of MNPI. Insider lists are vital when responding to requests for information from regulatory bodies.
Given the complexity and importance of managing MNPI, firms often struggle with accuracy when using manual processes and static lists. Fortunately, RegTech solutions like MyComplianceOffice (MCO) can help organisations stay on the right track by providing advanced tools for MNPI management.
MCO’s Know Your Transactions (KYT) suite offers key capabilities to support firms in meeting their compliance obligations, including centralised MNPI tracking to electronically maintain insider lists, log access to confidential information, manage wall-crossings, and track key events. MCO’s Insider & MNPI Management includes streamlined management of persons with temporary access to sensitive information based on deals, corporate events, and publication of financial statements or profit warnings.
Additionally, MCO’s Connected Persons & Relationships functionality, part of the Know Your Employee (KYE) suite of products, can further assist in minimising the spread of MNPI, reduce the risk of insider trading, and encourage a strong compliance culture.
Avoiding Regulatory Roadblocks
The lesson from this case is clear: firms must prioritise the management of MNPI to help them move forward confidently on the regulatory highway. Insider dealing cases are not just a breach of regulations; they can also undermine market fairness, cause reputational damage, and erode client trust.
By leveraging RegTech solutions, firms can stay ahead of risks, enhance oversight, and demonstrate their commitment to ethical, compliant employee conduct.
