June 24, 2021

Insider Trading: How to Handle Policy Foot-Faults

A member recently posted this question in our Q&A Forum (#10,761):

What do companies do to enforce their insider trading policies when employees accidentally trade during a blackout period?

John responded:

I’ve had this come up a few times. The first thing that needs to be done is to review the facts and circumstances surrounding the violation in order to assess its seriousness and to determine whether there’s a potential control issue. Then, there needs to be some kind of sanction, even if the violation was accidental and did not result in any violation of the law. In the case of minor violations, there’s usually been some sort of formal reprimand and additional training in the policy’s requirements.

The really key thing is that you need to enforce the policy in order to get any credit for it from the SEC and other regulators. There are discussions of issues associated with enforcement of insider trading policies throughout our Insider Trading Policies Handbook.

Liz Dunshee