For a number of years, SEC employees have been required to clear in advance securities transactions and to comply with minimum holding periods. Additionally, employees may not:

• make transactions in derivatives nor in securities of companies the agency is investigating
• engage in short selling
• participate in initial public offerings for seven calendar days after the offerings
• carry securities on margin

While the SEC has for many years prohibited employees from investing in stocks of entities directly regulated by the SEC (such as broker-dealers and investment advisers), the rule amendments broaden the prohibited holdings restrictions to ban employees from investing in financial industry sector funds. This policy exists because employee ownership of financial industry sector funds poses similar risks of conflicts of interest and appearance concerns.

Under the new amendments, the enhancements to data collection will:

• allow employees to comply with existing reporting requirements by authorizing financial institutions to transmit data on their covered securities transactions and holdings directly to the SEC through an automated electronic system
• enhance internal compliance controls by facilitating the detection and remediation of violations in real time, mitigating burdensome manual processes for transaction confirmations and reporting, and providing an independently verifiable source for compliance regulation and testing

The new rules will also enhance the effective use of the SEC’s resources to monitor compliance of securities investments and transactions that involve significant ethics risks. The rule amendments exempt diversified mutual funds from the Supplemental Ethics Rule’s requirements because diversified mutual funds pose a low risk of misuse of nonpublic information for personal gain, conflicts of interest, or appearance problems, as compared to other types of securities. Mutual funds that concentrate investments in a particular sector, industry, business, state, or country other than the United States remain subject to the rules.

The Supplemental Standards of Ethical Conduct for Members and Employees of the Securities and Exchange Commission final rule goes into effect 30 days following publication in the Federal Register.

Source:

SEC Updates Ethics Rules Governing Securities Trading by Agency Personnel (sec.gov)