Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, April 9, 2008

FINRA Issues Guidance on Unauthorized Proprietary Trading

In the wake of several recent cases involving allegations of unauthorized or "rogue" trading resulting in substantial losses by firms both in the United States and abroad, many FINRA firms are undertaking comprehensive reviews of their internal controls and risk management systems designed to prevent such trading activity. FINRA is issuing a Notice to Members to highlight sound practices for firms to consider as they undergo that process and to remind firms that even profitable unauthorized trading can result in regulatory exposure if it involves falsification of the firm's books and records, failures in supervisory control systems, market manipulation or fraud. Therefore, internal control systems should be designed to address regulatory as well as business and reputational risk. Regulatory Notice 08-18, Sound Practices for Preventing and Detecting Unauthorized Proprietary Trading Executive Summary.

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