Monitoring Employees’ Personal Trading - When Brokerage Statements Matter

As financial markets become more interconnected, the potential for conflicts of interest, insider trading, and other forms of misconduct increases. This is why firms need to establish robust systems to track employees' personal trading, ensuring compliance with regulations and ethical standards.

The best way to track employees’ personal trading is by using regulatory technology (RegTech) that connects to accounts and automatically monitors for parameters set up by the compliance team. However, this is not always available to some firms for various reasons.

Challenges when accounts can’t be electronically linked

Despite advancements in RegTech, firms often face challenges tracking employees’ personal trades when brokerage accounts can’t be electronically connected. Common hurdles include:

• Employees using multiple platforms that aren’t integrated with firm monitoring systems
• Smaller brokerage firms that lack the technical capability to provide data connections
• Employee trading through personal accounts (e.g., joint or trust accounts) that are difficult to link

In these cases, regulatory obligations require firms to rely on alternative methods, such as collecting brokerage statements, to monitor personal trading activity.

The role of brokerage statements in monitoring employee trades

When electronic connectivity is unavailable, brokerage statements serve as an essential compliance tool. They provide:

• A complete record of trades: Statements contain trading details, including dates, amounts, and the securities traded, enabling firms to review transactions for alignment with internal trading policies and SEC regulations
• An audit trail: Statements provide an official record for audits or investigations, helping firms confirm employee adherence to policies, such as holding and blackout periods
• Proactive monitoring: Regularly reviewing employee statements (often quarterly) helps firms identify conflicts of interest or improper trading while ensuring compliance with regulatory record-keeping requirements

Best practices for tracking personal trading without electronic connectivity

To maintain compliance in situations where electronic tracking isn’t possible, firms should adopt these best practices:

1. Implement a clear reporting policy: Require employees to submit brokerage statements regularly, ideally monthly, as outlined in the firm's Code of Ethics.
2. Establish a review process: Designate team members to review statements for adherence to internal policies and regulatory requirements.
3. Maintain secure records: Organize and store brokerage statements securely for easy access during an audit or exam.
4. Provide employee training: Educate employees on compliance obligations and the consequences of failing to report accurately and on time, including potential termination.

How we help

ACA’s Employee Compliance Solution, part of our award-winning ComplianceAlpha^® RegTech platform, provides firms with the tools needed to streamline compliance operations and reduce risk. Key features and benefits include:

• Broker statement tracker: Employees can upload PDF statements for accounts that cannot connect electronically, ensuring manual tracking is seamless.
• Automated monitoring and alerts: Simplifies personal trading, certifications, and disclosures while identifying potential conflicts of interest.
• Efficient compliance workflows: Automates processes like statement collection and provides timely alerts, freeing teams to focus on strategic oversight.
• Customizable tools: Manage statements by account or reporting period through an intuitive interface.
• Seamless certification process: Integrates statement submission into compliance certifications.
• Managed services support: For firms lacking internal resources, ACA’s Managed Services team can handle day-to-day compliance operations, saving valuable time.

With expertise from former regulators and compliance officers, ACA’s RegTech platform is trusted by over 1,250 firms worldwide to enhance compliance and streamline operations.

Contact us today to learn how ACA can help you launch, grow, and protect your firm.

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