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Expert networks, alternative data and managing risks of material non-public information
Journal of Financial Compliance,
7
(2),
189-194
(2023)
Abstract
Expert networks and alternative data providers can be sources of invaluable information with which to make investment decisions, and they can play an important role in maximising returns from financial markets, but with the use of the sophisticated information they provide comes certain risks of regulatory scrutiny and even potential investigation for insider trading. However, a well-designed compliance programme can be tailored to monitor for, prevent, and detect red flags to avoid investigations and charges by financial enforcement authorities. Due diligence, the establishment of proper policies and procedures, and adherence to best practices will make the difference, not only in avoiding prohibited trading but in ameliorating the potential consequences if allegations of illegal behaviour arise. Financial advisers looking for an edge are well advised, themselves, to understand the risks and prepare against them.
Keywords: expert network; alternative data; material non-public information; MNPI; insider trading; investment best practices; SEC
The full article is available to subscribers to the journal.
Author's Biography
James G. Lundy is a partner and litigator within the Securities Enforcement & Litigation Practice Group at Foley & Lardner LLP, based in the firm's Chicago office. Jim successfully resolves high-stakes enforcement matters by drawing on his deep technical insights and emotional intelligence. Jim seeks to protect the reputations and stakeholder relationships of his clients under investigation by the Securities and Exchange Commission (SEC) and other regulatory bodies, leveraging his experience working in the SEC's Division of Enforcement for almost a decade. Jim spent the last several years of his service with the SEC helping lead the Division of Examinations programme for the Midwest region. His clients include public companies and their boards of directors, investment advisers, broker-dealers, hedge and private equity funds, investment banks, futures trading firms, and the leaders of these organisations. He has helped clients resolve high-stakes SEC and other regulatory investigations with no charges filed, and he has lowered enforcement settlement demands by hundreds of millions of dollars. Jim also leads internal investigations; serves as an independent monitor; provides counsel on governance, compliance and policy issues; handles cybersecurity regulatory investigations; defends clients in complex financial services litigation; and serves as an independent monitor.
Margaret Gembala Nelson is a partner with Foley & Lardner LLP, where she represents financial services entities, accounting firms, corporations and their professionals in government enforcement investigations and examinations, complex securities and business litigation, and auditor liability matters. She also conducts internal investigations on behalf of clients and advises on regulatory compliance and risk management issues. Margaret has more than 20 years of experience as a regulatory and litigation lawyer focusing on complex securities, accounting, compliance and commercial matters. Prior to joining Foley, she served as senior counsel within the SEC's Enforcement Division for nearly ten years, including within the Division's Asset Management Unit.
Bill Mccaughey is an associate with Foley & Lardner LLP, where he is a member of the firm's Securities Enforcement & Litigation, Government Enforcement Defense & Investigations, and Antitrust Practice Groups.
