6.1.8.1. Insider Trading Policies and the Chinese Wall
The Insider Trading and Securities Fraud Enforcement Act of 1988 (“ITSFEA”) added Section 15(f) to the Exchange Act. This new section requires broker-dealers to “establish, maintain, and enforce written policies and procedures reasonably designed” to prevent the misuse of material, nonpublic information by the broker-dealer or any associated person. Section 15(f) also gives the SEC broad authority to require the use of particular policies or procedures to prevent insider trading.
Firms with diverse securities-related business are considered fertile breeding grounds for insider trading. In a classic example, if a firm’s investment bankers are working on the sell side of a merger, the firm
