RIA Compliance and Practice Management Blog

RIA Code of Ethics: Employee Trade Monitoring During Market Volatility

Posted by RIA in a Box

Mar 23, 2022 10:42:35 AM


  • There have been well documented cases in recent years of employees at investment advisory firms succumbing to the gamification of the stock market by using digital apps that have made access to markets easier than ever. With the recent market volatility, employee personal trading volumes have increased significantly. As employees open more accounts, employee trade monitoring becomes ever more unwieldy as Chief Compliance Officers ("CCOs") need to spend more time collecting and reviewing more account statements. To make matters worse, the collection process of which has become more difficult and important as more employees work remotely.

How an RIA Firm Can Create a Culture of Compliance Checklist


Now is a great time to review your Code of Ethics and Policies and Procedures to ensure a culture of compliance around personal trading. As access persons have access to confidential client and investor information, it is critical that these persons are acting ethically and in the best interest of the clients. Furthermore, it is important to review your tech stack to ensure you have the best tool in place to detect and respond to potential trading violations efficiently and effectively.

To help create a culture of compliance and understanding regarding personal trading, we recommend implementing the following best practices:

  • Validate that all employees have reviewed and attested to your firm’s Code of Ethics. Furthermore, develop Policies and Procedures that ensure ethical trading behavior from your employees. This includes regular reviewing and monitoring of the accounts, holdings, and transactions of your employees and their family members.
  • Employ a technology solution to automatically record, monitor, and consolidate employee personal securities transactions and reduce errors related to manual entry and review.
  • Proactively identify and resolve potential trading violations by setting up alerts to be notified in real-time of any potential Code of Ethics breaches.
  • Establish an electronic data feed and ensure broker feeds are connected and secure.
  • Ensure trade limits and restricted lists are updated and maintained.
  • In periods of increased trading, consider if more frequent surveillance is right for your firm.
  • Remind staff that compliance must remain at the forefront of their minds. Firms need to carefully manage their employees' transactions and holdings to mitigate risk and remain compliant.
  • Automate the personal trading pre-clearance process with trade limits and restricted lists.

Firms can simplify the process of identifying potential trade violations with employee trade monitoring software. The right employee trade monitoring software will streamline the transactions, holdings, and accounts attestations process and help you identify potential trading violations. All actions taken in the employee trade monitoring software should be automatically logged, therefore simplifying the compliance documentation process.Schedule an Employee Trade Monitoring Demo Today!

Topics: RIA Operations, RIA Compliance, RIA Technology

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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