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Employee Surveillance Programs

NYSE Rule 342.21(a) says "trades effected by employees and their family members are to be determined as nonviolative of insider trading, manipulative and deceptive devices at each member organization, including trades executed at other member organizations."

NASD Conduct Rule 3050 states "A person associated with a member, prior to opening an account or placing an initial order for the purchase or sale of securities with another member, shall notify both the employer member and the executing member, in writing, of his or her association with the other member; provided, however, if the account was established prior to the association of the person with the employer member, the associated person shall notify both members in writing promptly after becoming so associated." Duplicate confirms and statements must be sent to you, the employer. If they are not, we will notify you regarding the existence of the account(s).

In effect, you must know where your employees are maintaining accounts or attempting to open accounts. If you do not own a crystal ball, you should take advantage of the Employee Surveillance Program (ESP). ESP monitors account openings by a member's employees that may occur at other member firms. The program allows us to report these account openings by your employees as they happen, which dramatically reduces incidents of front running, as well as the potential for insider trading violations.

Civil penalties and criminal fines or imprisonment can result from violations of the insider trading laws.

Fraudwise is another valuable service that ES Programs offers its members. This will allow you to run background checks on your employees and applicants. The Fraudwise reports range from basic informational reports (criminal searches and social security number validation) to comprehensive investigations.

For additional information on these valuable compliance tools, please contact E S Programs, Inc.