Insider trading & steps to prevent insider trading

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Insider trading & steps to prevent insider trading

If a person has access to the insider information of a Company and Base of such information, he makes profits/gains on trading of share of that company, then we call it insider trading. Insider trading is strictly prohibited by law.            

Condition of insider trading

1. Must access to the insider information, and

2. Must be gain       .

Steps to prevent insider trading:

0101. Restrict risky trading: -

A popular strategy to reduce the risk of violating insider trading rules is to restrict employee trading on company-owned securities at specific times, such as the weeks around when earnings reports come out.

0202.Appointment an in –house watchdog: -

Instead of simply relying on your employees to submit clearance requests for trades of covered securities, one way to ensure compliance, for posterity’s sake, is to mandate employee submission of statements from the brokerages that they personally use – combined with attestations from each employee that their submissions of trades are accurate, this can be a powerful deterrent against insider trading on the securities owned by your firm.

 

0303.Ensure that your employees are educated on insider trading.

Insider trading is easier to commit than most would like to admit. Having a robust training program that not only acknowledges this, but drives home just how serious the penalties for insider trading are – for both insiders and the companies they work for – is integral. This should cover all possible instances of insider trading.

 

0404.Act quickly to investigate insider trading

Should one of your employees come under scrutiny for their personal trading, it is imperative to move as quickly as possible to assess the legitimacy of the allegations. Launching an investigation

will involve judging whether this was an isolated incident, and whether any other employees exhibited similar trading patterns.

005.   Use Leverage technology to prevent insider trading

Some of these options simply boil down to having additional personnel to monitor, log and clear trades – but this isn’t always necessary. There is a class of software known as Insider Trade Management Systems (ITMS)

 

 

 

 

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