Statement from SEC Enforcement Division – Public Companies Need to Guard Against Insider Trading

White Collar Investigations and Securities Litigation Alert | March.26.2020

On March 23, 2020, the co-heads of the SEC’s Division of Enforcement issued a statement urging public companies to be mindful of their insider trading policies and controls in light of unprecedented market conditions during the COVID-19 crisis.  The Enforcement Division pointed out three circumstances related to COVID-19 that warrant this reminder:

  • Corporate insiders are regularly learning new material nonpublic information that may hold an even greater value than under normal circumstances;
  • This may be particularly the case if earnings reports or required SEC disclosure filings are delayed due to COVID-19 circumstances;
  • A greater number of people may have access to such material nonpublic information than in normal circumstances.

As a result of these circumstances, the Enforcement Division reminded public companies that they must be mindful of their disclosure controls and procedures, insider trading prohibitions, codes of ethics, and Regulation FD and selective disclosure prohibitions to protect against the improper dissemination and use of material nonpublic information.

The Enforcement Division made clear that it is devoting substantial resources to ensure that “Main Street investors” are not victims of fraud or illegal practices, and to maintain confidence in the fairness and integrity of our markets during these unprecedented economic conditions.  As a result, the Enforcement Division has put public companies on notice that a lack of controls or a failure to effectively implement controls designed to detect and prevent insider trading will be viewed extremely seriously, especially during a time when the SEC is doing everything it can to maintain confidence in the markets.

Assistance

Please contact any member of Orrick’s White Collar Investigations and Securities Litigation Group for further assistance.