The Securities and Exchange Commission recently issued a Risk Alert regarding the dangers of unauthorized trading. It specifically encourages broker-dealers and investment advisers to review their policies and procedures aimed to prevent unauthorized trading and address any weaknesses in that area.
As noted by the SEC, unauthorized trading may cause firms and investors to incur losses, and subject firms to significant legal, regulatory and reputational risks. While it was ultimately dismissed, the recent enforcement action against compliance officer Theodore Urban also highlights that the SEC is paying more attention to the steps taken to detect and discipline rogue traders. Therefore, strengthening compliance and supervisory controls regarding unauthorized trading should be a top concern for every firm.
The SEC suggests that in any review of business practices and internal controls, firms should seek to identify any circumstances that might permit an individual (or group of individuals) to engage in or conceal unauthorized transactions.
More specifically, the SEC’s Risk Alert recommends that all firms have controls that address the following:
- Potential unauthorized trading for the firm’s own account or for a customer or client account;
- Position mismarking;
- Exceeding trading limits;
- Personal trading activities of associated persons or other employees; and
- Creation and maintenance of inaccurate or altered records.
Eckerle Law offers a highest-quality and cost-effective alternative to the traditional law firm model for a wide variety of transactional and regulatory matters serving all your business law needs. Our experienced attorneys also provide a full range of compliance services for investment advisers, offering compliance tools that are tailored to fit the ever changing regulatory landscape as well as your business needs.
If your company would like to strengthen its business practices, please contact us today so we can leverage our experience to create real-life business and legal solutions to help your business thrive.