$1.8m Insider Trading Eavesdropping Case: 5 Tips for Managing Ethical Walls

In today's interconnected world, the boundaries between personal and professional spheres have become increasingly blurred.

The rise of remote work, while offering flexibility and convenience, has also introduced vulnerabilities, particularly in controlling the flow of sensitive information. This shift has presented new challenges for financial firms, highlighting the critical need for robust measures to safeguard against insider trading and protect material non-public information (MNPI).

Recently, a US man has been accused of capitalizing illicitly on information overheard from his wife's remote work calls, resulting in a staggering $1.8 million gain. This incident serves as a stark reminder of the risks associated with inadequate controls around MNPI and underscores the importance of implementing stringent measures to manage ethical walls and prevent leaks that could lead to insider trading violations.

While regulators are investigating the husband for insider trading, the financial firm itself is responsible for safeguarding sensitive information, which it failed to do in this instance. With that in mind, here is a reminder of the key things firms can do to manage ethical walls or information barriers in their firm in remote work environments. 

5 tips for managing ethical walls:

Managing Ethical Walls Tip 1: Establish Clear Information Policies and Information Barrier Programs

Define comprehensive information policies covering both on-site and remote working scenarios, ensuring every employee understands the policy's intricacies. Implement clear and detailed access authorization processes and make sure these are up-to-date and reviewed regularly.

Managing Ethical Walls Tip 2: Prioritize Employee Training

Conduct thorough training sessions on securing devices and adhering to information policies at home, emphasizing the importance of data security and ethical practices. Compliance teams need to educate employees on what the information policy looks like and how it adapts depending on the working location. Compliance teams also need to understand how to monitor for breaches in either scenario. Firms should also encourage reporting of potential MNPI breaches.

Managing Ethical Walls Tip 3: Implement Advanced Monitoring Technologies

Deploy advanced technologies capable of transcribing, analyzing, and monitoring communications to identify suspicious behaviors and potential breaches that meet specific criteria. Utilize trade surveillance technology to detect abnormal trading behavior among employees within the firm and personal dealing accounts. Leveraging an integrated platform that can overlay structured data, such as transaction details, with unstructured data, like communications, provides holistic oversight, enabling firms to better detect information leakages and insider trading infringements.

Managing Ethical Walls Tip 4: Ensure Cybersecurity is Considered 

Ensure that information barriers and ethical wall policies address cybersecurity events as well as the accidental leakage of confidential information. Adopt encryption, multi-factor authentication, and network segmentation. Include cybersecurity training in employee education programs.

Managing Ethical Walls Tip 5: Maintain Clear Documentation

Maintain thorough documentation of procedures and compliance efforts. Document investigations into potential insider trading offenses for record-keeping and compliance purposes.

As remote work continues to gain traction in financial firms, effectively managing ethical walls is paramount to safeguard against conflicts of interest and financial implications.

By implementing these strategies, compliance officers can ensure the integrity of information barriers in remote working environments. Interested in learning more? Dive deeper into the following blogs for comprehensive insights on information barriers and the protection of MNPI.

• Managing information barriers in the era of remote working

• 5 ways to protect your firm from MNPI breaches

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SteelEye is the only fully integrated trade and communications surveillance solution, trusted by over 160 financial firms globally. We empower financial firms with the data-driven tools and complete insights they need to focus on what matters, all from a single platform.

State-of-the-art algorithms and intelligent alerts proactively detect market manipulation and compliance breaches, while our holistic data model – which combines communications, trades, orders, news, and market data – provides intelligent insights and deep analytics. Founded in 2017, SteelEye has offices in the UK, North America, APAC, Portugal, and India.