The US’ Securities and Exchange Commission (SEC) has proposed amendments to its ethics rules in order to strengthen and modernise its ethics compliance programme.
Currently, SEC employees are required to preclear securities transactions and comply with minimum holding periods. All SEC employees are prohibited from, among other things, transacting in securities of companies the agency is investigating, engaging in short selling, transacting in derivatives, participating in initial public offerings for seven calendar days, or purchasing or carrying securities on margin.
The proposed amendments would:
- Expand the existing prohibited holdings restrictions to ban employees from investing in financial industry sector funds;
- Authorise the SEC to collect data on employees’ covered securities transactions and holdings directly from financial institutions through an automated electronic system; and
- Exempt diversified mutual funds from the Supplemental Ethics Rule’s requirements, given that they generally pose a low risk of conflicts of interest, misuse of non-public information for personal gain, or appearance problems. Mutual funds that concentrate investments in a particular sector, industry, business, state, or country other than the US would remain subject to the rules.
SEC chair Gary Gensler said: “I was pleased to support today’s proposal to strengthen, modernise, and optimise the SEC’s ethics requirements. We at the Securities and Exchange Commission are entrusted by the public to oversee the US capital markets. These amendments, if adopted, would help ensure that the SEC honours the trust that the public has placed in us.”
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