In an unusual statement that essentially underscores the chaos coursing through the financial markets, the U.S. securities regulator has warned corporate executives against insider trading.
In a statement, the SEC said, company directors, consultants, officers, employees, and other outside professionals who have access to material, non-public information should be “mindful of their obligations” to keep those information confidential and comply with prohibitions against illegal securities trading.
The warning comes midst concerns that that certain individuals may be gaining access to critical market-moving information ahead of the rest of the world, following a handful of suspiciously timed trades or price movements.
“Most notably, the U.S. dollar pared gains moments before the Federal Reserve announced last week that it was launching a new dollar funding facility for nine central banks to ease a global dollar crunch”, reported Reuters.
Last week, in a separate incident, two U.S. Republican senators came under scrutiny for selling large amounts of stock before the coronavirus-induced market meltdown and after closed-door briefings on the coronavirus outbreak.
With global businesses and markets reeling from the effect of the Wuhan coronavirus, companies are finding it difficult to keep up with their regular disclosures. Earlier this month the SEC had said it would grant regulatory relief on a conditional basis for companies seeking to delay mandatory filings because of issues related to the Wuhan coronavirus.
This means, corporate insiders are regularly learning new information of great value while the average investor may not have access to such material, nonpublic information, said Stephanie Avakian and Steven Peikin, co-directors of the SEC’s Enforcement Division, in a statement.
“Trading in a company’s securities on the basis of inside information may violate the anti-fraud provisions of the federal securities laws,” they said in a statement.
SEC officials have warned, the SEC’s Enforcement Division is committing “substantial resources” to ensure that retail investors are not victims of fraud or illegal practices.