Industry Watchers See Increased Risk of Fraud and Insider Trading
Lawyers from Cleary Gottlieb recently discussed how firms may address heightened risk of insider trading in the current environment. “The volatility in securities markets and the crisis atmosphere might lead to riskier behavior by insiders, particularly as more people have access to confidential information, with some of them being less accustomed to having access to and properly handling” material non-public information. The lawyers note that remote work magnifies the concerns about the security of confidential information and advise firms to be vigilant in training employees, particularly those who might come into possession of confidential information as a result of the pandemic; update insider trading policies and materials; clarify to employees appropriate conduct and what constitutes material non-public information; and properly manage cyber risk by encouraging employee vigilance and ensuring adequate resources for IT departments. Meanwhile, Finra released a new Notice advising broker-dealers and their associated persons to be aware of and take appropriate measures to address the increased risks and challenges as criminals exploit the vulnerabilities inherent in a remote working environment. Finra highlighted four common scams to look out for: (1) fraudulent account openings and money transfers; (2) firm imposter scams; (3) IT help desk scams; and (4) business email compromise schemes. The notice also outlined steps on how firms may mitigate related risks.