SS&C Technologies : Employee Trade Monitoring is Important During Extreme Market Volatility
June 16, 2021 at 03:50 am EDT
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It has been widely reported that retail investing has been booming, fueled by a combination of 'Reddit meme stocks' and use of stimulus money by first-time investors[1]. There have been well documented cases of employees at broker-dealer and investment advisory firms being distracted by the gamification of the stock market and the use of apps that have made access to markets easier than ever. Recent extreme market volatility has been responsible for a number of spectacular trading losses and behavior showcased on social media. Account openings by first-time investors have surged, with more individuals opening accounts online and trading for the first time on trading apps or online investment firms[2]. This increase in account activity has led to a spike in employee trading. With most employees continuing to work remotely, the monitoring of employee trading activities has only become even more important. As many employees are privy to confidential investor and investment strategies and some even insider, material non-public information (or MNPI), there is no better time to ensure you have robust and unambiguous procedures and policies in place to ensure there will be no breach of your firms Code of Ethics.
RIAs are monitoring their employees to make sure their employees are following the code of ethics and their own firm's personal trading policies: Know where your employees are opening accounts and ensure that the channels for the delivery of confirms and statements are up to date and functional.
For FINRA regulated firms, under FINRA Rule 3210[3], financial institutions must be aware of all accounts and the trading and positions of their employees at all times.
Consistently remind employees of their obligations under your firm's Code of Ethics and explain why.
Where possible, avoid the burden of manually reviewing statements and confirms. Look to technology platforms to help with surveillance by ensuring that all your employee trading data is not in hard copy or PDF but in a format that can be read or analyzed by software.
Ensure that each employee knows that these policies and rules are not only designed for them but also extend to spouses, children and family members.
Emphasize that these rules remain in full force even though they are working remotely.
Step up the frequency of surveillance from monthly to at least weekly or, preferably, daily.
If your firm requires pre-clearance of all trades, be aware of pre-cleared limit or GTC orders and step-up surveillance for swing trading and short-term holding violations.
Contact SS&C to learn how the Risk & Compliance Intelligence (RCI) platform and its employee trade & activity monitoring module can quickly enhance your Code of Ethics compliance program.
Alternative Investments, Asset Management, Research, Analytics, and Consulting, Risk Management
stock market , code of ethics , employee trading
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SS&C Technologies Holdings Inc. published this content on 16 June 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 June 2021 07:49:01 UTC.
SS&C Technologies Holdings, Inc. is a global provider of services and software for the financial services and healthcare industries. The Company provides software-enabled services that allow financial services providers to automate business processes. The Company allows its clients to automate and integrate front-office functions such as trading and modeling, middle-office functions such as portfolio management and reporting, and back-office functions such as accounting, transfer agency, compliance and regulatory services. The Company provides its solutions within the institutional asset and wealth management, alternative investment management, retirement, financial advisory and financial institutions vertical markets. It provides solutions to the healthcare industry, including pharmacy, healthcare administration and health outcomes optimization solutions. Its healthcare solutions include claims adjudication, benefit management, care management and business intelligence services.