Insider Trading Compliance Training Insights
In most countries around the world, it is illegal to trade on public stock, bonds and securities based on non-public knowledge. Depending on where you’re based, the relevant legislation is enforced with various levels of vigor.
Enforcement in the US, for example, is among the most draconian. Penalties have steadily increased in recent years, and if convicted, prison sentences of up to 20 years and maximum fines of $5 million for individuals – and $25 million for corporate entities – are on the statute book.
You might be tempted to believe that such savage punishments would be a major consideration in making normal employees aware of the implications of insider trading. Unfortunately, however, this does not seem to be the case.
One of the major stumbling blocks in preventing insider trading is the lack of knowledge by employees within an organization that they are violating the law. They simply may not recognize that a seemingly innocuous remark about the business they work in during a dinner party could be laden with significance to an unscrupulous listener.
Similarly, they may be unsure as to what type of information would be valuable to a third party. Most would naturally assume that details of a proposed takeover or merger could be ‘dynamite’ in the wrong hands. But not many would recognize that details of a new product being developed could equally be as highly profitable in the wrong hands.
With such a wide difference in perceptions from employee to employee as to what constitutes insider trading, it’s more important than ever that any organization which trades publicly should undertake insider trading training to make all employees aware of what to look out for.
This should be applicable to all employees. Information could be innocently leaked by the janitor as easily as by the CEO. Among the key elements that you need to get across in Insider Trading Compliance Training are the following:
There are laws in place to combat insider trading, so you need to fully set out the legal and regulatory situation within your company or your sector. These laws will change from time to time, and training should be constantly updated to reflect those changes and endure compliance.
Employees should be made fully aware that they must not share or use any internal information about the operations of a business to affect financial performance. They should also be made aware that sharing information with a seemingly innocent party can also have disastrous consequences – if it’s passed on, in turn, to a less innocent party.
To ensure that there’s a genuine culture of compliance within your organization, it should come from the top down. The importance of the topic should be reinforced regularly not just through compliance training, but also through regular communications from senior management. It could also be used as a KPI for staff, and become a part of their regular performance assessment.