Stay vigilant to the risks of insider trading
Insider trading is one of the most significant risks for any financial services firm. If detected, it can result in regulators closing down your business. StarCompliance provides a solution that enables your compliance team to actively manage employee trades, contextualizing them against market activity and helping to identify potential illegal trading that may have been motivated by inside information.
How is insider trading detected?
Historically, detecting insider trading has been a very manual, laborious process. It involves trawling through trading records and employee data, trying to identify employees that had access to confidential information prior to making personal trades that subsequently proved lucrative due to major market events, such as mergers or acquisitions. StarCompliance has developed an effective and efficient solution to this inexact science. Our Insider Trading application automates the surveillance process, monitors market news and activity, and provides the data you need to quickly evaluate and investigate the likelihood of insider trading.
Detecting trades ahead of price movements or significant events
The STAR application allows your compliance team to automatically screen for employee trades that occurred prior to key market events, such as price movements, mergers or acquisitions – a potential indicator of insider trading. It saves significant time and resources in carrying out this task manually – and offers much greater accuracy. Following detection, a compliance officer can raise a case in the system, which includes links to all relevant information and news articles, so that the likelihood of insider trading can be properly assessed.
By automatically gathering and sorting the contextual information surrounding employee trades, the Insider Trading product helps you to catch incidents that may otherwise slip through the net. Interactive, detailed charts are available to assist in visually pinpointing where insider trading may be an issue, showing every relevant trade as well as market closing times and high-impact news items.
Global news impact data service
Detecting insider trading requires access to current affairs information and relevant news events. STAR offers a newsfeed from diverse, respected sources, including established publishing houses and influential social media voices. News items are passed through a powerful filtering and indexing system, so we can highlight items that are most relevant to your business, prioritizing high-impact articles.
The system will cross reference these news events with your employee trading data, looking for any unusual trades made prior to significant market events, which could have been based on inside information – giving you the full market context for every trade.
By providing URLs for every news item, and offering the ability to raise cases for further investigation, STAR enables you to demonstrate due diligence to regulators, and provide audit records, showing that you are doing everything possible to prevent and mitigate insider trading. In this way, STAR protects your organization from both insider trading and its regulatory consequences.
Deterring rogue traders
In addition, the simple fact that you deploy insider trading detection software in your organization is likely to deter anyone considering illegal activity based on inside knowledge.
Insider list management
As part of the market abuse regulatory regime, any company that trades on the stock exchange is required to keep a list of all people who have inside information at any time – including their contact details.
It is your responsibility to keep this list up to date and to inform employees when they have been placed on the list. For large companies with hundreds of employees working on multiple projects, this is an onerous administrative task.
That’s why StarCompliance created its Insider List Management product to help you maintain these extensive lists and keep them up to date. It’s a sophisticated tool that manages the recording of all employees involved in any project, including when they come on to the project, what information they are privy to, and when they leave the project. It also handles all communications with the employees concerned.
This means that if the regulators ever request information about any potential insider trades, you have all the detail required at your fingertips about who had advance knowledge of relevant events.
Financial data services
By partnering with a leading global provider of financial market data, analytics and related services, we have access to time-sensitive pricing, evaluation and reference data for more than ten million securities traded around the world, including hard-to-value instruments. This enables StarCompliance to offer a shared resource that you can use to access the latest data on equities, UITs, mutual funds, debt instruments and more, to support your market abuse monitoring.
Talk to the experts
If you’re looking for software with robust compliance solutions that will improve business efficiency while safeguarding the integrity and reputation of your organization, look no further. Schedule a personalized demo with a Star professional to see what the STAR platform can do for you.
Use software tools and news data to detect and resolve insider trading
Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, non public information about the security.