Prevent market abuse with proactive employee trade surveillance

Frequently Asked Questions 

• Are employee trade monitoring systems mandatory?

  Investment firm employees must declare their personal trades to their employer, which can be done using an automated system like TradeLog. The system checks trades against preset parameters and monitors for violations, reducing manual work.

• What are the compliance risks of employee personal trading?

  There is the potential for the company to become subject to substantial financial penalties for failing to prevent employee personal trades that benefit from insider knowledge or comprise a conflict of interest. This can, in turn, lead to reputational damage for the company and a loss of trust with clients.

• How does pre-clearance software help compliance teams?

  By running employee personal trades through a pre-clearance system, you can minimise compliance risks. Enter into TradeLog parameters that relate to the regulatory requirements and your own company policies so that it will flag potential problems before a purchase or sale is made. TradeLog helps you optimise your process to allow trades to take place in good time and without tying your compliance function up with manual investigation work. This automated pre-trade clearance system helps you reduce the administrative burden while securing your compliance with all relevant legislation.

• Who should submit pre-clearance requests?

  Managers, employees and tied agents of investment firms, as well as their family members, close friends and anyone else connected to them (if there is a chance that the trade would benefit the employee), should also use the system.

• How does MiFID II impact trade surveillance?

  MiFID II (Markets in Financial Instruments Directive II) is a legislative framework instituted by the EU to regulate financial markets. It’s focused on transparency and investor protection. MiFID II requires firms to have robust systems in place to detect and report potential market abuse. An automated pre-clearance system like TradeLog can streamline this process, maintain accurate records and provide the necessary audit trail for compliance.

• How can automation improve transparency in the trade pre-clearance process?

  Automated trade surveillance systems like TradeLog keep a comprehensive record of all employee trades, both approved and declined. This allows compliance teams to generate standard and custom reports with ease, ensuring that all trade activities are transparent and traceable.