There has been plenty of attention given to insider trading, and it has generated a lot of publicity for people who have been guilty of insider trading. No company wants its executives to be accused of insider trading and using non-public information to benefit and enrich themselves. However, the biggest risk that companies are facing today is not malicious intent or greed but negligence.
Most companies can easily prevent insider trades from occurring in the first place if they employ a stable system of checks and balances. These measures will prevent insider trades from happening, and the company won’t face allegations of criminal activity. Therefore, we will share the five best ways to prevent insider trading in your company. Here is what you need to do.
1. Practice Risk-Free Trading
One of the best ways to reduce insider trading in your company is to practice risk-free trading. You can place restrictions on insiders not to trade when the company’s quarterly earnings report is about to be released. It will reduce all instances of insider trading occurring and won’t see insiders placing risky trades. You can also create a list of stocks in which your employees can’t trade at all, which will ensure that your company has nothing to do with insider trading.
2. Keep an Eye on All Insider Trades
You should look at all trades being made by company insiders so that you can determine whether there has been a trade made using insider information. Observing these trades will allow you to manage all trades and keep a check on their employees. You can even employ a third party to check trades made by your corporate insiders to ensure they follow the rules and don’t make trades based on insider information.
3. Educate Your Employees on Insider Trades
It is easy to commit insider trading when you are not aware of the threats and risks. You can diffuse the situation by educating your employees about insider trading and the penalties they stand to suffer. Implement a training program to teach employees how to avoid insider trades and what to do if they come across someone guilty of insider trading.
4. Investigate Insider Trading Quickly
Don’t waste time if you find someone guilty of insider trading. You need to take action yourself before an outside party threatens you with legal action. When you have your house in order and know about insider trading in your company, you can act fast to take action against the culprits. That will also send a strong message out to others that the company won’t tolerate insider trading.
5. Use Technology to Limit Insider Trading
You can also use technology to help limit insider trading in your company. There is plenty of software around to alert you if someone from your company is making insider trades. That will protect your company from insider trades and damaging lawsuits that arise from insider trading activity. Insider Trading Management Systems (ITMS) are designed to help companies notice insider trading and prevent it from occurring in the company.