US Authorities Investigating NY SEC Staff Investments

Securities And Exchange Commission SECBy U.S. Government [Public domain], via Wikimedia Commons

Federal Authorities along with the U.S. Securities and Exchange commission have approached some of the employees in the New York office of SEC concerning an investigation of improper financial holdings, according to a report from The Wall Street Journal.

No widespread violation

Both federal prosecutors and the office of the inspector general of Securities and Exchange Commission are looking into the matter to find out whether or not employees have made an investment in line with the Securities and Exchange commission internal rules, which proscribe trading shares of the company that are under investigation, according to WSJ, referring to sources familiar with the matter.

It was mentioned in the report that only New York office employees are under the scanner and there is no sign of extensive violation of rules.

The Securities and Exchange Commission could not be reached for comment and the U.S. Attorney’s office in Manhattan declined to comment, says WSJ.

SEC aims at tighter control

The investigation follows the renovation of the Securities and Exchange commission’s internal compliance monitoring system, undertaken after the 2009 allegation by the agency inspector general at that time accusing two employees of insider trading. Although no case of insider trading could be proved against the employees, the overhaul was tainted after it came to the Securities and Exchange commission’s notice that brokerage information by the employees had been compromised.

In 2009, the Securities and Exchange commission was planning increase surveillance of employee holdings by designing an automated computer system that looked into the transactions made by employees on a real time basis along with the brokerage firm data to disclose the personal holdings, in order to curb alleged insider trading.

However, the system could not be implemented as it was criticized for compromising employee privacy, so the Securities and Exchange commission decided to design the program like the one used in the private sector. At present, the system used is not as efficient as the previous techniques that were promoted by Securities and Exchange commission and its inspector general to curtail any risk of improper trading, according to current and former Securities and Exchange commission employees.

The current system lacks monitoring techniques previously endorsed by the agency and its inspector general as a way to reduce the risk of improper trading, current and former Securities and Exchange commission employees said.

Securities and Exchange commission spokesman John Nester turned down a request to comment, but said that the SEC compliance program is “second to none in government.” However, some onlookers believe the Securities and Exchange commission compliance program should be more advanced to prevent employee insider trading.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at

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