In today’s remote work environment, cybersecurity has become one of the Industry’s largest vulnerable components when servicing clients. As majority of the Industry has migrated to remote work and new communication technologies, this has forced more data and information to be susceptible to risk. In this blog post, we will discuss material nonpublic information and how we believe this will be an area of additional focus as the Industry gears up for 2021.
In its annual report, the Division of Enforcement emphasized the importance that firms have “robust corporate controls and compliance policies around the use and safeguarding of material nonpublic information.” Investment professionals and fund managers, in particular, should expect increased scrutiny in the coming year as part of the SEC’s dogged efforts in protecting the best interests of retail investors.
As a case in point, among the most interesting of the 33 insider trading cases flagged during the fiscal year involved a senior index manager at a globally recognized index provider and his friend, a manager at a sushi bar. Together, they allegedly perpetrated an insider trading scheme that generated more than $900,000 in illegal profits.
The pair is said to have purchased call or put options of publicly traded companies hours before the public announcement that those companies would be added to or removed from a popular stock market index that the index manager helped his employer manage. The alleged perpetrators then liquidated their options positions for a substantial profit.
The year has prepared us for much of the unknown, as majority are continuing to work from home. As the industry continues to adjust and assume a new routine closer the normal, the JLG Team Is always ready and available to assist you and your firm assess the strength of your program, especially during year-end. If you or your firm would like any assistance or additional Information, please contact us here or at 619.298.2880.