Compliance Communicator: July 2013


Memo to Managers

Insider Trading Misconception

A common misconception among employees is that insider trading is only an issue for senior executives, because employees at lower levels don’t have access to “inside information.” Too many assume that they don’t ever come across the kind of information which, when acted upon, draws the attention of federal prosecutors.

In fact, employees at any level can possess information that could be used to make illegal stock transactions under U.S. law – and the laws of most other countries. A number of information types fall into this category: news about new products or manufacturing processes; possible acquisitions or divestitures; information about the Company’s finances or sales; or news about executives or business strategies.

It’s not uncommon for people to discuss these things with each other and even with friends and family. When the information is brought home and discussed with a spouse, U.S. enforcement agencies refer to it as "pillow talk," which puts the person disclosing the information and the person using it at risk. If any trade is made based on this information—including by the proverbial “friend of a friend”—everybody involved can be held accountable.

If you are exposed to information that might be considered material (meaning it could influ­ence an investor’s decision to buy, sell or hold a stock), and is nonpublic (meaning the investing public is not aware of it), remember your obligations to keep the information confidential. One way stay safe is to avoid discussing major announcements before they become public, even with your family and closest friends.  And, don’t think that your invest­ments are too small to be noticed.

It’s pretty simple: trading or tipping based on material non-public information is against company policy—and the law.

Q & A

Questions of the Month

Q: I heard we’re planning to announce soon that we’ll be increasing our purchases from one of our suppliers, which happens to be a small, publicly traded company. I think their relationship with us should really help their stock price. It’s OK if I buy their stock, right? I mean, it’s not our company…

A: No, buying stock when you are in possession of material, non-public information is against our policies and against the law, even when it is the stock of another company.

Q: I learned in a meeting that one of our business partners is having some trouble and they’re planning a major announcement in a week or two. My parents own a lot of stock in the company, and I’m worried about their retirement money. Can I tell them they should sell some of their stock, as long as I don’t tell them why?

A: No. You’re in a difficult situation, but telling your parents to sell after learning what you’ve learned would be considered ‘tipping’ and could get both you and them in serious legal trouble. 

Insider Trading: Rising Jail Times

Using Compliance Communicator™

Compliance Communicator is designed to engage middle management and ensure that ethics and compliance are top of mind and instilled in the everyday work environment.

Use this valuable resource in whatever manner suits you best – copy and paste parts of it into e-mails or presentations, post sections on your website, or forward the entire newsletter to your staff.

The content has been written by the advisory services division of NAVEX Global, the Ethical Leadership Group.

Learn more about ELG

In providing you our Compliance Communicator electronic newsletter, NAVEX Global is granting you permission to publish any or all of the content to best suit your organizational needs.  Please limit distribution to personnel internal to your corporation or organization.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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