SEC Cracks Down On Compliance And Surveillance Failures

Earlier this week, the Securities and Exchange Commission agreed to settle charges with a company related to prevention and detection of potential insider trading.  The SEC alleged that the company failed to enforce policies and procedures to prevent and detect securities transactions that could involve the misuse of material, nonpublic information, and that the company failed to adopt and implement policies and procedures to prevent and detect principal transactions conducted by an affiliate.  The agreed upon penalty was $15 million.

The SEC brought the charges under Section 15(g) of the Securities Exchange Act of 1934, which requires brokers and dealers to establish, maintain, and enforce policies and procedures to prevent the misuse of material, nonpublic information, as well as Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-(7), which require registered investment advisers to adopt and implement written policies and procedures reasonably