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Compliance and Regulation
Definition of Employee Trade Pre-Clearance Software
Employee trade pre-clearance software is used to allow or deny prospective transactions by a company’s staff.
Features of employee trade pre-clearance software
Trade applications
Stakeholders use the software to submit requests for approval before executing securities transactions. The platform is accessible to all relevant parties connected with the company on a device through a portal on the corporate system.
Alerts and notifications
The employee trade monitoring software features alerts for relevant actions or information. For example, it might alert a person discharging managerial responsibilities (PDMR) to closed periods when they may not trade in the company’s own securities or when they meet the threshold for reporting transactions in the issuer’s financial instruments to the authorities.
Record-keeping
Using an online tool for pre-clearance creates a digital audit trail of which trades were requested, which were restricted and when. It proves that you implemented a pre-clearance process to bolster your compliance processes.
Knowledge base
The software acts as a knowledge base for employees regarding compliant trading. It can store the latest company policy documents and provide information about their responsibilities and obligations.
Benefits of pre-clearance software
Efficiency
There are so many requirements for companies to ensure their employees trade responsibly and within the boundaries of compliance that pre-clearance software is essential for employee trades. Having all the relevant information in one, central location means that it is easier for your compliance team to gain an overview of each individual’s trading situation.
Regulatory compliance
An automated pre-clearance process helps firms maintain compliance with industry regulations such as The Markets in Financial Instruments Directive (MiFID II) and the Market Abuse Regulation (MAR).
Risk mitigation
An effective pre-clearance system is essential to risk mitigation. It helps prevent misconduct and reduces the potential negative impacts of both regulatory risk and reputational risk that could result from non-compliant trades made by employees.
Better transparency
A clear, single source of information ensures transparency over trading activity within the workforce and helps in the event of an investigation. You no longer have to worry about fragmented systems that could lead to important information going missing. It is all held in one place to improve companies’ compliance understanding.
Do we have to install employee trade pre-clearance software?
Employee trade pre-clearance software is not mandatory, but it is a solution to meeting obligations of investment firms to be aware of employees’ and PDMRs' trades and prevent market abuse and manipulation. The alternative is a laborious paper process. Pre-clearance software often comes as part of a package within employee personal trade monitoring software, adding additional functionality to your efforts to prevent market abuse.Related Terms
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