Review Q3 Personal Securities Transactions

An investment adviser firm is required to review and monitor the personal securities transactions (“PST”) by “access persons” in order to prevent inappropriate trading.

Each access person needs to report his or her personal securities transactions (direct and indirect beneficial ownership) within 30 days of the end of each calendar quarter. If you are a state-registered firm, it is important to know that many state regulators require reports to be delivered within 10 days of the end of each calendar quarter.

Your investment adviser should review these personal securities transactions for inappropriate conduct like front-running, scalping, cherry picking profitable block trades, insider trading or other misuses of confidential client information.  Also, depending on your investment adviser’s specific procedures, your investment adviser’s review should focus upon whether there are violations of any restricted lists, black-out periods, or other conditions placed on access person’s personal trading activities or holdings.

For your reference, the following are best practice checklists covering some of the issues that an investment adviser firm’s chief compliance officer should consider when reviewing the personal securities transactions of the investment adviser firm’s access persons:

• Personal Securities Transactions – Checklist for Reviewing PSTs
• Insider Trading Identifying and Mitigating Risk Checklist
• Trading Best Practices for Detecting Cherry Picking

Finally, your investment adviser firm must maintain the following records for the last five years: lists of its access persons; each quarterly personal securities transactions report and initial and annual personal securities holdings report made by an access person; the review and approval of each personal securities transactions or holdings report; any violation and corrective action; and any decision and supporting reasons to approve any initial public offering or private placement for an access person.