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Compliance and Regulation
Definition of Employee Trade Monitoring Software
Employee trade monitoring software refers to digital tools that allow organisations to streamline the monitoring of personal securities transactions by employees and persons discharging managerial responsibilities. It is typically utilised by companies that are under an obligation to maintain compliance with strict regulatory oversight, often related to legislation such as the Market Abuse Regulation. This software allows them to stop and deter trades that might be informed by inside information, as well as those that could cause a conflict of interest or otherwise compromise the organisation’s reputation. The software logs the individual’s personal trades, giving compliance teams oversight into potentially problematic transactions made by employees that contravene the company’s trading policy.
Features of employee trade monitoring software
Pre-clearance process
The software should allow companies to request individuals take part in a pre-clearance procedure before making personal trades. The company can then approve the individual to go ahead with the transaction or decline if there is a compliance issue.
Central reporting and tracking
The software is a central repository, containing details of all of an employee’s trades. The software is a central repository for all of an employee’s trades. By obliging staff to make their personal trades through the software, it makes it easier to keep track of their portfolio and monitor for potential contraventions.
This allows the organisation to understand the employee’s holdings, taking action if a previously acceptable transaction contravenes the company’s trading policy due to circumstances within the business. For example, a PDMR is heavily invested in a competitor of the company.
In addition, for PDMRs, it can show whether or not they have reached the threshold for reporting their trades in the company’s own securities to the authorities.
Compliance alerts
The software generates alerts and notifications based on your predefined rules. For example, it will notify a PDMR at the start of a closed period, during which they are prohibited from dealing in the company’s stock. This reminds them of their obligations and reduces the risk of non-compliant personal trading. .
Benefits of employee trade monitoring software
Regulatory compliance
With regulations such as the Market Abuse Regulation (MAR), companies are under an obligation to reduce the opportunities for staff to carry out market abuse and market manipulation.
Monitoring employee trades can prevent activities such as insider dealing and PDMR trading during closed periods, which could have significant consequences both financially and reputationally.
Risk mitigation
Conduct risk is a major consideration for organisations, with the potential negative consequences of failing to adhere to the various pieces of legislation. By integrating employee trade monitoring software into your workflows, you reduce the chances of legal, financial and reputational damage.
Reminders
When you set up dates for closed and open periods, you can generate automatic reminders for PDMRs regarding their duties during this sensitive time. Similarly, you can inform them when they are close to, or have exceeded, the threshold for reporting transactions in the company’s own financial instruments to the national competent authority.
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