| Currently many compliance departments are under a | | | | - Firm's portfolio trades. |
| lot of pressure to gather together the information | | | | - Holdings and trades attestation data. |
| required to meet the basic requirements of SEC rules | | | | PERSONAL TRADING COMPLIANCE RULES |
| 204A-1 and 17j-1. Keeping track of pre clearance | | | | Ability to set up rules which can be run against this |
| requests, restricted lists, employee accounts, | | | | employee personal trading data and which can be |
| employee trading activity and employee holdings | | | | applied to different subsets of individuals within the |
| takes up so much of many compliance departments | | | | Investment adviser firm is extremely important. Any |
| time that having time to analyze this data is a | | | | compliance management system needs to be able to |
| challenge for many. The following diagram outlines the | | | | cover the following rule types at a minimum. |
| different types of data that the typical compliance | | | | 1. Security rules: |
| department needs to pull together in order to | | | | - Restricted lists |
| manage their employee personal trading compliance | | | | - Watch lists |
| requirements. | | | | - Blackout periods |
| Besides the difficulty of gathering all of the above | | | | - Approved lists |
| data compliance departments have to deal with the | | | | - Transaction rules (Di Minimis rules, short sells) |
| resistance of staff to the adoption of these | | | | 2. Security type rules |
| processes, and the difficulty of analyzing | | | | - Approved security type rules |
| spreadsheet, paper and email based data. | | | | - Restricted security type rules. |
| Automation of the personal trading compliance | | | | 3. Pre clearance checks |
| process can save firms a lot of time as well as | | | | - Validation that pre clearance requests were made |
| providing them with the ability to more easily analyze | | | | for an employee trade. |
| the data and check for trends in the data. Any | | | | 4. Employee Trade activity checks |
| automated personal trading solution needs to | | | | - Excessive trading |
| incorporate the following elements. | | | | - Holding periods |
| - Incorporate all main Personal trading data points | | | | 5. Checks against firms trade data |
| needed. | | | | - Front Running |
| - Flexible rules engine | | | | - Tailgating |
| - Flexible reporting. | | | | PERSONAL TRADING COMPLIANCE REPORTING |
| - Ease of use to facilitate easy adoption by | | | | Any automated personal trading solution needs to |
| employees. | | | | allow the users to easily retrieve the data they |
| - Streamlined processing to save employees time. | | | | require and should allow easy filtering and sorting of |
| - Integration with overall compliance program | | | | the data so that it can be extracted exactly as the |
| PERSONAL TRADING COMPLIANCE DATA | | | | user requires for trend analysis. Adoption and buy-in |
| The main data required to meet the minimum | | | | by employees of any compliance system is |
| requirements are: | | | | extremely important therefore any system will need |
| Trade pre-clearance | | | | to be easy to use and intuitive. Centralization of all |
| - Pre-Clearance requests. | | | | compliance tasks for employees also causes less |
| - Automated broker feeds of trading activity and | | | | confusion and only requires employees to learn how |
| holdings. | | | | to use one system. |
| - Employee account data. | | | | |