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The
SEC is looking to crack down on ineffective policies and
procedures as part of broader insider trading scrutiny, Gurbir
Grewal, the SEC's enforcement director, said in a recent
interview.
"The frustration with insider trading is that sometimes the
threat of jail and penalties don't prevent it," Grewal said. "So
we have to emphasize the tools we have and the firms need to
tighten up their policies to prevent abuse."
The SEC's efforts are aimed not just at insider trading in
equity markets, but also potential use of complex financial
tools including swaps or derivatives to benefit from non-public
information or to mask misconduct, he said.
Grewal declined to say whether the agency has or would launch an
enforcement sweep to target the issue.
Under Democratic leadership, the SEC has pursued theories of
insider trading seen by many as novel.
The SEC this month scored a victory in a "shadow trading" case
when a jury found that a former pharmaceutical company executive
violated civil insider-trading law by betting on another
company's stock after learning of the acquisition of his own
company, Medivation Inc.
That case has already prompted companies to begin checking their
policies to meet a broader standard to guard against misuse of
nonpublic information, said Perrie Weiner, a securities
litigation lawyer with Baker & McKenzie, a law firm in Los
Angeles.
"The SEC is going to be looking for policies that go beyond
simply saying that you're not allowed to trade on material
nonpublic insider information. They're going to be looking for
policies that prohibit trading in any other company to which the
information might apply."
The efforts will apply not just to public companies but also to
hedge funds and other firms that may gain access to nonpublic
information through advisory work, Weiner said.
The regulator has also been targeting violations of basic rules
and policies at financial firms. Earlier this year, Morgan
Stanley and a former executive agreed to pay more than $249
million to settle an investigation into the bank's failure to
enforce policies concerning misuse of material nonpublic
information.
(Reporting by Chris Prentice; Editing by Paul Simao)
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