Investor Relations 101

[Tina]

Issue Date: IR Alert - July 17, 2009

Insider Trading Under the SEC Spotlight: Following Allegations of Illegal Trading By Two Commission Attorneys, Stronger Rules Issued

The Securities and Exchange Commission this week released a series of new stronger rules governing securities trading by agency officials, in light of an investigation being conducted by federal prosecutors into possible illegal insider trading by two enforcement attorneys at the commission. The strengthened rules require the pre-clearance of all trades by agency insiders. They also prohibit the trading of all securities of corporations under investigation by the agency. MarketWatch reports.

The rules require SEC employees to certify that they don't have non-public information about the companies whose securities they are trading in. In May, it became known that the FBI had been investigating possible insider trading by the two agency enforcement attorneys, reports MarketWatch writer Ronald D. Orol.

The SEC rules come as the agency's inspector general, David Kotz, is scheduled to testify Monday afternoon at a House Financial Services subcommittee hearing about insider trading and government officials.

The rules come after the agency on May 22 took steps to improve its oversight of SEC staff investments. The commission is taking steps to set up a new computer compliance system that would help the agency verify and monitor employee trading. The SEC also created a Chief Compliance Officer to oversee the agency's compliance program.

SEC Chairwoman Mary Schapiro plans to devote more resources to the SEC's Ethics Office to monitor and review agency staff transactions.

The new rules require supervisors to conduct periodic spot-checks of employee securities transactions and work projects.

The House Financial Services subcommittee is scheduled to discuss an SEC report examining the impact of "alleged inappropriate" trading by government officials. Lawmakers will also discuss legislation that would prohibit insider trading by members of congress or their staff. The bill, H.R. 682, is known as the Stop Trading on Congressional Knowledge, or STOCK Act.