Securities Law Prof Blog

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

Wednesday, August 13, 2008

SEC and SROs Enter Insider Trading Surveillance Agreement

The SEC published for public comment an agreement among the securities self-regulatory organizations (SROs) that is designed to improve detection of insider trading across the equities markets by centralizing surveillance, investigation, and enforcement under NYSE Regulation, Inc. (NYSE Regulation) and the Financial Industry Regulatory Authority, Inc. (FINRA). Currently, each equity exchange is responsible for surveillance of trading on its market and any investigations and enforcement actions involving its members.  This proposed new approach by the SROs to detect and enforce prohibitions against insider trading arose from yearlong discussions among the SEC, NYSE Regulation, FINRA and the exchanges to improve market integrity and better protect investors and is intended to focus expertise and eliminate gaps and duplication in surveillance for insider trading among the equities markets.

To complement the regulatory allocation agreement published for comment today, the securities exchanges and FINRA also entered into regulatory services agreements. Together, these agreements would provide NYSE Regulation with responsibility for surveillance, investigation, and enforcement of insider trading in securities listed on the New York Stock Exchange and NYSE Arca; FINRA would have such responsibility with respect to NASDAQ-listed and Amex-listed securities, and securities listed solely on the Chicago Stock Exchange.

FINRA and the following equity exchanges are parties to these agreements:

American Stock Exchange LLC
Boston Stock Exchange, Inc.
CBOE Stock Exchange, LLC
Chicago Stock Exchange, Inc.
International Securities Exchange, LLC
NASDAQ Stock Market, LLC
National Stock Exchange, Inc.
New York Stock Exchange, LLC
NYSE Arca Inc.
Philadelphia Stock Exchange, Inc.
NYSE Regulation, Inc. (acting under authority delegated to it by NYSE)

The insider trading initiative for the equities markets follows a similar consolidation of responsibility for surveillance for insider trading involving securities options, which the SEC approved in June 2006.

Public comments should be received by the Commission no later than 21 days after publication of the proposed plan in the Federal Register.

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