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Proposed Rule 10b5-1 Changes Signal Increased MNPI Scrutiny

Firms should be prepared for increased regulatory scrutiny around material nonpublic information (MNPI) and insider trading under the administration of SEC Chair Gary Gensler. In a recent speech at the CFO Network Summit, Gensler noted that 10b5-1 trading plans have led to “real cracks” in the SEC’s insider trading regime. The SEC’s Annual Agenda for 2021 includes a proposed amendment to address concerns about the use of the affirmative defense provisions of Rule 10b5-1. 

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SEC’s Annual Agenda Includes Focus on ESG Disclosures

The U.S. Securities and Exchange Commission (SEC) recently released its Annual Agenda for 2021. The Agenda provides a list of Rules in the Prerule, Proposed, and Final stages and offers a snapshot of the SEC’s long and short term regulatory priorities.

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Compliance Checklist for Registered Investment Advisers

First and foremost, Registered Investment Advisers (RIAs) are held to a standard of fiduciary duty by the SEC. As defined by the SEC, RIAs must act in the best interests of their clients, should not engage in activities that are in conflict with the interest of the client, and must provide a full disclosure of all material facts to clients and prospective clients.

To prove that they are able to meet these standards, RIA firms must have solid compliance programs in place.

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MNPI Remains a High Risk Area for Compliance

Failing to adequately manage Material Non-Public Information (MNPI) remains a high risk area for compliance, as evidenced by recent actions in the U.S. and the U.K. A private equity firm paid $1 million to settle SEC charges for failing to implement effective Insider Trading compliance policies. The FCA published a Decision Notice fining a former CEO £658,900 for market abuse and banning him from future roles linked to regulated activity.

To avoid hefty fines and actions, firms must have comprehensive and actionable policies and procedures around the management of MNPI and insider lists to minimize risk.

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Constraints and Pressures Facing Compliance Today

What are the most significant pressures facing compliance programs in 2021? And where are the largest constraints? An audience of Chief Compliance Officers and General Counsel were asked those questions during the during the webinar Compliance Budgeting: Reducing Risk by Doing More With Less.

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