Series 14: 6.1.8.1. Insider Trading Policies And The Chinese Wall

6.1.8.1. Insider Trading Policies and the Chinese Wall

The Insider Trading and Securities Fraud Enforcement Act of 1988 (“ITSFEA”) added Section 15(f) to the Exchange Act. This new section requires broker-dealers to “establish, maintain, and enforce written policies and procedures reasonably designed” to prevent the misuse of material, nonpublic information by the broker-dealer or any associated person. Section 15(f) also gives the SEC broad authority to require the use of particular policies or procedures to prevent insider trading.

Firms with diverse securities-related business are considered fertile breeding grounds for insider trading. In a classic example, if a firm’s investment bankers are working on the sell side of a merger, the firm�