Sidoti & Company, LLC ("Sidoti"), an SEC-registered broker-dealer, agreed to pay a $100,000 penalty to settle SEC charges alleging that the firm failed to implement adequate procedures to prevent the misuse of material nonpublic information ("MNPI") by firm personnel trading for an affiliated hedge fund.
According to the SEC Order, the firm failed to implement adequate information barriers to prevent the firm's CEO, and other personnel, from trading for an affiliated hedge fund on the basis of MNPI received from the firm's research and investment banking departments. In particular, the Order notes that the firm's CEO controlled the firm's investment banking and research departments, and also maintained trading authority over the affiliated hedge fund. While the firm imposed restrictions on personal account trading of securities on the firm's restricted list, the Order alleges that the firm failed to impose comparable restrictions on trading in restricted list securities for the affiliated hedge fund. The Order notes that in response to concerns expressed during an SEC examination, the firm adopted some information barriers to address the CEO's conflicting roles, but the firm lacked procedures reasonably designed to enforce these barriers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
