The SEC has never been more effective at detecting and investigating insider trading than it is today. Recent actions against senior lawyers in large, well-known companies suggest that insider trading by in-house lawyers may be on the rise. If true, this could have reputational and possible legal implications for legal departments and the companies they serve. In early May 2019, the SEC brought an insider trading action against the life-long friend and house guest of the general counsel at Cintas Corp. who, unbeknownst to the lawyer, stole information from the lawyer’s home office concerning an impending acquisition.
While the lawyer was innocent of wrongdoing and plainly a victim of his friend’s misconduct, the case raised questions about whether in-house lawyers in general are doing enough to protect the material nonpublic information entrusted to them. It is only a matter of time before the SEC begins to question whether corporate insider trading policies are reasonably designed and whether companies are doing enough to train their employees on compliance with the insider trading laws. Given the SEC’s increasing use of data analysis in insider trading investigations, it is likely that we will see more enforcement actions where lawyers either traded on, or were the common sources of, material nonpublic information.
‘Enforcement 40’ for 2020
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