Reuters recently reported that the SEC and FINRA were asking trading firms specific details regarding their trading strategies and/or their secret computer codes.
This new effort by the SEC and FINRA is part of a joint investigation into suspicious market activity as well as to examine compliance with securities regulations. The specific requests relating to computer code, obviously, have irked many in the industry since the requests have to do with targeting stock trading firms and hedge funds. These inquiries relate to trading information and computer coding information that may have been shared or “borrowed” with others, and used for illegal activity. Clearly, the SEC and FINRA are focusing on this information to better understand the trading markets, but, of course, if they find anything of an illegal nature, it may result in enforcement examinations.
FINRA executives, recently, told a SIFMA conference that FINRA did not make these requests “lightly.” However, this worries many since the information is privileged and proprietary, and may find its hands into competitors. Although, the SEC and FINRA both have policies in place to protect such information, once the information is out, companies may find themselves in a predicament. Counsel should certainly handle these particular issues.