SEC Imposes Staff Trading Bans
Following a Securities and Exchange Commission Office of Inspector General investigation which "revealed suspicious activity, appearances of improprieties, and evidence of possible trading on nonpublic information, and/or potential insider trading on the part of SEC Enforcement attorneys," the SEC has imposed new internal rules governing securities transactions for all SEC employees.
Under the new SEC rules, staff will be prohibited from trading in the securities of companies under SEC investigation, regardless of whether the employee has personal knowledge of the investigation. Employees will also be required to preclear all securities transactions with supervisory staff prior to trading and certify that they do not possess non-public information about the company being traded. Finally, all SEC staff must authorize their brokers to provide the Commission with copies of trade confirmation statements, so that ethics officials can monitor compliance with the new rules.
Whether the SEC has adequate infrastructure to monitor staff trading, in addition to its preexisting oversight duties, remains to be seen. While the Commission currently lacks surveillance systems to monitor staff trading, the new rules call for an agency-wide computer system that will assist officials in preclearing and tracking all employee trades. Chairman Schapiro has also directed the consolidation of compliance and reporting responsibilities within the SEC's Ethics Office, and has authorized the hiring of a new chief compliance officer.
