SEC Proposes Updates to Ethics Rules Governing Securities Trading by Personnel

In an effort to further enhance ethical standards of its personnel and to modernize its corresponding rules, the U.S. Securities and Exchange Commission (SEC) – in cooperation with the Office of Government Ethics – has published a press statement to announce an upcoming consultation paper with proposed amendments to its Ethical Rules. Currently, so the SEC, employees and their families are already subject to numerous restrictions as far as securities tradings and holdings are concerned. For example, staff members may NOT engage in short sales, derivative transactions, or securities transactions with respect to companies that are being investigated. The proposed changes would now
– prohibit the engagement in „financial industry sector funds“ due to possible conflicts of interest;
– permit the SEC to get information from employees‘ financial institutions as regards securities transactions and holdings. The SEC thereby proposes to establish an automated information collection (exchange) system with financial institutions to ensure timely detection and mitigation of any potential violations; and
– exempt domestic mixed („diversified“) mutual funds from the SEC’s ethical rules so as to allow staff members to invest in such funds. The exemption, however, would only apply to U.S. mutual funds.
With these changes, so the Commission, it can increase supervisory efficiency and channel its efforts towards areas where compliance monitoring appears to be even more important to ensure the prevention of inside trading and ensure investor and market confidence.