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Industry Spotlight > Broker Dealers

SEC Enforcement Chiefs Warn Against Insider Trading

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The Securities and Exchange Commission’s enforcement chiefs warned Tuesday that they’re on the lookout for an increase in insider trading due to the coronavirus pandemic, and the exam department said it would move to off-site exams.

“We wish to emphasize the importance of maintaining market integrity and following corporate controls and procedures,” co-chiefs Stephanie Avakian and Steve Peikin said in a joint statement.

“In these dynamic circumstances, corporate insiders are regularly learning new material nonpublic information that may hold an even greater value than under normal circumstances. This may particularly be the case if earnings reports or required SEC disclosure filings are delayed due to COVID-19.”

Given these unique circumstances, they continued, “a greater number of people may have access to material nonpublic information than in less challenging times. Those with such access — including, for example, directors, officers, employees, and consultants and other outside professionals — should be mindful of their obligations to keep this information confidential and to comply with the prohibitions on illegal securities trading.”

The two said they “similarly urge public companies to be mindful of their established disclosure controls and procedures, insider trading prohibitions, codes of ethics, and Regulation FD and selective disclosure prohibitions to ensure to the greatest extent possible that they protect against the improper dissemination and use of material nonpublic information.”

Likewise, broker-dealers, investment advisors and other registrants “must comply with policies and procedures that are designed to prevent the misuse of material nonpublic information,” the two said.

Cipperman Compliance Services notes that the SEC has five years to file a case. In certain circumstances the agency “may continue to bring cases thereafter,” Cipperman said. “While we persevere through this crisis, make sure not to cut regulatory corners, and practice good corporate hygiene by documenting decisions and following procedures.”

Off-Site Exams

The SEC’s Office of Compliance Inspections and Examinations stated in a message that it has moved to conducting exams “off-site through correspondence, unless it is absolutely necessary to be on-site.”

OCIE said that it’s working with registrants to address the timing of its requests, availability of registrant personnel, and other matters to minimize disruption.

“Specifically, we will work with registrants to ensure that our work can be conducted in a manner consistent with maintaining normal operations, and importantly, necessary or appropriate health and safety measures.”

— Check out Senator Sued Over Stock Sales After Virus Briefing on ThinkAdvisor.


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