Checklist Helps Firms Monitor Potential Conflicts of Interest and Prevent Insider Trading
High profile cases related to insider trading, coupled with changing regulatory requirements in the securities industry, are bringing more attention to Codes of Ethics compliance, including personal trade surveillance. To help investment advisers alleviate compliance challenges in this area, Wolters Kluwer Financial Services is providing a checklist for adopting and maintaining a written Code of Ethics, as required by the Investment Advisers Act of 1940.
The checklist provides a starting point for drafting or evaluating a Code of Ethics program, designing rules for testing compliance with personal trading parameters set out in the Code, and evaluating how technology can mitigate resource constraints and risk for a compliance program.
Compliance officers at investment adviser firms can find a breakdown of what their Code of Ethics should include, as outlined by Securities and Exchange Commission (SEC) Rule 204A-1(a) under the Investment Advisers Act. The checklist also walks them through specific questions they should consider, such as:
- Can our system customize rules and reporting that apply to different employee groups within our firm?
- Does our system provide standard rule parameters for restricted lists, holding periods and blackout periods, as well as the ability to configure custom trade rules?
- Does our system compare executed employee trades against their preclearance requests?
“Not only can this checklist help advisers who are new to registration, but it is also a very valuable guide for existing advisers, who should regularly review their policies and procedures to account for both the latest regulatory requirements and industry best practices,” said Carol Beckett, compliance manager for Investment Compliance Solutions at Wolters Kluwer Financial Services.