Securities and Exchange Commission Chairman Mary Schapiro outlined a series of measures the agency is taking to strengthen its internal compliance program to guard against inappropriate employee securities trading.
It only makes sense that we have a world-class compliance program just as we expect from those we regulate, says Schapiro. The employees at the SEC have a well-deserved reputation for integrity and professionalism. These measures will further bolster our standing by helping to prevent not only an actual impropriety, but the appearance of one as well.
The measures the agency is taking include:
-First, the staff has drafted a set of new internal rules governing securities transactions for all SEC employees that will require preclearance of all trades. It also will, for the first time, prohibit staff trading in the securities of companies under SEC investigation regardless of whether the employee has personal knowledge of the investigation. The rules have been submitted to the federal governments Office of Government Ethics, which approves agency ethics rules.
-Second, the SEC is contracting with an outside firm to develop a computer compliance system to track, audit and oversee employee securities transactions and financial disclosure in real time.
-Third, Chairman Schapiro has signed an order consolidating responsibility for oversight of employee securities transactions and financial disclosure reporting within the Ethics Office. And, she has authorized the hiring of a new chief compliance officer.
In addition to the existing rules, the newly-approved rules will:
-Require employees to pre-clear all their securities transactions to ensure, among other things, the company whose stock they are trading is neither being investigated by the SEC nor is involved in an IPO. Also, any employee with access to non-public information about a companys registration statement may not trade in that security.
-Prohibit ownership of securities in publicly-traded exchanges and transfer agents, in addition to existing prohibitions against owning securities in broker-dealers, registered investment advisers and others directly regulated by the Commission.
-Require that all employees authorize their brokers to provide the agency with duplicate trade confirmation statements. Those statements would then be integrated into a new computerized system so that employees can more easily comply with reporting obligations and the ethics office can more effectively monitor compliance.
-Require employees to certify before any trade that they do not possess any non-public information about the company being traded.
Streamlining the responsibilities within one office will help eliminate any potential for inefficiencies, says Schapiro.
L.D.