SEC on high alert for illegal stock market activity
The Securities and Exchange Commission is — like many of us — working from home, but still very much working. Why? Among other reasons, COVID-19 has created a fertile moment for insider trading.
We spoke with Haima Marlier, a former senior trial counsel for the SEC, and now a partner at the law firm Morrison & Foerster, to get a better idea of what the SEC is looking out for. The following is an edited transcript of that conversation.
David Brancaccio: Given the shock to the economy and so much in flux because of coronavirus, the big question is how is COVID-19 affecting just about every business? And if someone had some special information, perhaps there may be an impulse for people to do insider trading?
Haima Marlier: Well, it seems that there could always be an impulse for certain bad actors to do insider trading. It’s also important to understand that this environment is very challenging for companies with respect to insider trading for two reasons. First, so many employees are working remotely. Second, given the way that the virus is impacting business operations, many employees — and not just high level directors and officers — have coronavirus-related, material, nonpublic information. So a hypothetical example could be inventory clerks working for a manufacturing company that notice that an essential input to their company’s key product, normally delivered weekly, has in fact not been delivered for weeks.
Brancaccio: And what’s your sense? I mean, the SEC was the first federal agency to tell its employees to work from home. If there’s anyone out there who thinks “OK, they’re not paying attention,” you think that the SEC is indeed paying attention?
Marlier: I think the recent trading suspensions as well as statements from the SEC, there have been a few so far, show that the SEC is very much paying attention. The SEC has already suspended trading in the stock of two companies due to concerns about the accuracy of coronavirus-related information on the internet.
Brancaccio: The concern is maybe companies pumping up their stocks by circulating unsupportable claims, or people acting on the company’s behalf doing so?
Marlier: Sure, it could be that. It appears in the case of one of these trading suspensions that the SEC said that the inaccurate information it was concerned about appeared to come from third-party stock promoters.
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