On March 23, the Division of Enforcement of the Securities and Exchange Commission (SEC) issued a Statement warning against insider trading during the ongoing COVID-19 pandemic. In particular, the SEC cautioned that insiders are “regularly learning” new material non-public information (MNPI) that may “hold an even greater value than under normal circumstances.” The SEC also noted that unique circumstances mean more people may have access to MNPI than may typically be the case. This is particularly true for companies that delay earnings releases and SEC filings due to the pandemic.
Recognizing the heightened risk of illegal securities trading as a result of these and other factors, the SEC urged publicly traded companies to be mindful of their established controls and policies to protect against the improper dissemination and use of MNPI.
Proactive Steps for Public Companies
In light of the SEC’s Statement and the unique circumstances that companies are facing during the pandemic, publicly traded companies should take affirmative steps to mitigate insider trading risks.