Parallel Actions Against Securities Analyst Show SEC and DOJ Focus on Front‑Running

Monitoring employees’ compliance with personal trading policies is one of an adviser’s essential – but very challenging – compliance duties. Employees intent on ignoring policies and filing false compliance attestations may be hard for an adviser to detect. On the other hand, the recent SEC enforcement action and parallel criminal complaint against a securities analyst show that the SEC investigators, and their counterparts at the DOJ, have powerful tools for detecting market abuse by advisers’ employees and others. The SEC has claimed that the analyst made millions of dollars in illicit profits through a years-long front-running scheme, trading ahead of his large investment adviser employer in an undisclosed account in his wife’s name. This article outlines the allegations in the civil and criminal complaints, with commentary on the implications of the actions from Akin Gump partners Peter I. Altman, Michael A. Asaro and Brian Daly. For more on personal trading, see our three-part series on code of ethics fundamentals: “Why Fund Managers Need Them” (May 20, 2021); “What They Must – and May – Include” (Jun. 3, 2021); and “How to Monitor and Enforce Compliance With Them” (Jun. 10, 2021).

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