Wednesday, December 8, 2010

Law Firm Insider Trading -- Alleged Violation by IT Manager at Richards, Layton & Finger

Several news sources are reporting on yet another allegation of insider trading originating at a law firm. This time the story centers on an IT manager at Richards, Layton & Finger, a firm comprising approximately 140 lawyers.

The SEC alleges that this individual worked with an external accomplice to engage in 22 trades based on inside information between June, 2009 and October, 2010, when he was terminated. The firm noted that:
  • "...all firm employees are required to acknowledge the firm’s confidentiality policy annually.  In addition, the firm requires that all stock trades by all employees be cleared before they are made.  The allegations of the complaint, if true, indicate knowing violation of these various policies."
However, it appears that in this instance policy was not sufficient to prevent the practices of this IT manager.

Interestingly, this individual was tasked with information security management, a role which "...gave him access to electronic and other files containing material non-public information." Which also raises the question of "who watches the watchers" in environments without suitable checks and balances enforcing information access restrictions and monitoring unusual activity.

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