SEC Implements New Compliance Program (On Itself)

After the embarrassing news that two of its attorneys are accused of insider trading, the SEC has decided to strengthen its internal compliance program to guard against inappropriate employee securities trading.

“It only makes sense that we have a world-class compliance program – just as we expect from those we regulate,” said Chairman Schapiro. “The employees at the SEC have a well-deserved reputation for integrity and professionalism. These measures will further bolster our standing by helping to prevent not only an actual impropriety, but the appearance of one as well.”

There are some common sense controls being put in place:

  • Employees must pre-clear all their securities transactions to ensure, among other things, the company whose stock they are trading is neither being investigated by the SEC nor is involved in an offering.
  • Prohibit ownership of securities in publicly-traded exchanges and transfer agents, in addition to existing prohibitions against owning securities in broker-dealers, registered investment advisers and others directly regulated by the SEC.
  • Require that all employees authorize their brokers to provide the agency with duplicate trade confirmation statements.
  • As part of the pre-clearance and compliance process, periodic reviews will be conducted by supervisors to compare transactions against the employee’s work projects to guarantee compliance with the rules.
  • A new computer system to automate employee reporting of personal securities transactions which would simplify the reporting process for employees and ensure accurate pre-clearance checks. (The new system would also provide for easy verification of transactions by comparing reported trades against confirmation statements provided directly by each employee’s brokerage firm.)
  • Consolidating the compliance and reporting responsibilities within the SEC’s Ethics Office. Previously, responsibility within the SEC for ensuring staff compliance was spread between two offices.

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  1. Securities trading | Financial Articles - May 27, 2009

    […] SEC Implements New Compliance Program (On Itself) | Compliance …After the embarrassing news that two of its attorneys are accused of insider trading, the SEC has decided to strengthen its internal compliance program to guard against inappropriate employee securities trading. …  read more… […]