SEC Issues Report on Brokerage Firms' Handling of Confidential Information

FOR IMMEDIATE RELEASE
2012-200

Washington, DC, Sept. 27, 2012 – The Securities and Exchange Commission today issued a staff report intended to help broker-dealers safeguard confidential information from misuse, such as insider trading. The report by the Office of Compliance Inspections and Examinations (OCIE) describes strengths and weaknesses identified in examinations into how broker-dealers keep material nonpublic information from being misused.

This report should help broker-dealers assess the effectiveness of their controls over sensitive information, said OCIE Director Carlo di Florio. "The report illustrates the types of conflicts of interest that may arise between a broker-dealer´s obligations to clients that provide confidential information for business purposes and the potential misuse of such information for insider trading or other improper ends. It also describes various methods that broker-dealers use to identify and effectively manage such conflicts, including information barriers that limit the flow of sensitive information."

Conflicts of interest and other issues of concern raised by the report include:

The report also highlights effective practices that examiners observed at some broker-dealers, such as:

The types of issues identified in this report may be helpful to firms as they review their conflict of interest risk management programs. In particular, in any review of information barriers control programs, broker-dealers should be alert to changes in business practices and available compliance tools.

Christine Sibille of OCIE´s Washington D.C. office played a key role in producing the report. In addition to Ms. Sibille, the following OCIE staff worked on the examinations underlying the report: Roberta Boyd, Jane Cash, Michelle B. Davis, Everardo DeArmas, Juanita Hamlett, Wanda Hunter, Judy Lee, Danielle Perfetuo, and Lisa Wardlaw in the Washington, D.C. office, and Claudia Arroyo, Theresa D. Gleason, Stephanie Morena, John M. Nee, and Hermann Vargas in the New York Regional Office.

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