Tips for investment advisers to proactively manage regulatory risk in 2025

Insider trading is a serious issue in the financial industry that can undermine market integrity and erode public trust. It occurs when individuals trade securities based on material non-public information, giving them an unfair advantage over other market participants. To combat this unethical behavior, regulations have been put in place, including the development of a code of conduct that explicitly forbids insider trading.

The code of conduct must be comprehensive and clearly outline what constitutes insider trading, as well as the consequences for violating the rules. It should also provide guidance on how employees can report potential violations and protect whistleblowers from retaliation. By creating a strong code of conduct, companies can deter insider trading and promote a culture of transparency and accountability.

In addition to the code of conduct, it is crucial for companies to implement policies and procedures that prevent insider trading. This includes restricting access to material non-public information, monitoring trading activities, and conducting regular training sessions to educate employees about their responsibilities. By establishing clear guidelines and oversight mechanisms, companies can reduce the risk of insider trading and mitigate the potential harm to investors and the market.

Advisers have a responsibility to ensure that their employees understand and adhere to the rules governing insider trading. This involves developing detailed policies that outline the procedures for handling material non-public information, as well as the consequences for violating the rules. By providing guidance and training to employees, advisers can help prevent insider trading and protect their clients’ interests.

Overall, insider trading is a serious offense that can have far-reaching consequences for individuals and companies involved. By implementing a code of conduct, developing policies and procedures, and educating employees, companies can prevent insider trading and uphold the integrity of the financial markets. It is essential for all market participants to comply with regulations and ethical standards to maintain a level playing field and ensure fair and transparent markets for investors.