a financial institution and a recent sec regulation by david hack l.
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A Financial Institution and a Recent SEC Regulation by David Hack SEC Regulation Due to recent insider trading and other illegal activities, investment banking groups were required to implement additional measures.

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sec regulation
SEC Regulation
  • Due to recent insider trading and other illegal activities, investment banking groups were required to implement additional measures.
  • These new measures were implemented by the SEC to prohibit any communication between analyst and traders which includes instant messaging, email, etc.
  • Also, all communication sent by traders and analyst must be saved for three years.
sec regulation3
SEC Regulation
  • 1964 – Securities Act Amendments PL 88-467
  • 1968 – Securities Disclosure Act PL 90-439
  • 1975 - Securities and Exchange Act PL 94-29
  • 1980 – Depository Institutions and Deregulation Money Control Act PL


  • 1982 – Garn-St. Germain Depository Institutions Act PL 97-320
  • 1984 – Insider Trading Sanctions Act PL 98-376
  • 1988 – Insider Trading and Securities Fraud Enforcement Act PL 100-704
  • 1989 – Financial Institutions Reform, Recovery, and Enforcement PL 101-73
  • 1999 – Gramm-Leach-Bliley Act PL 106-102
  • 2000 – Commodity Futures Modernization Act of 2000
  • 2002 – Sarbanes-Oxley Act


investment banking players5
Investment Banking - Players
  • Stock Broker – “A Stock Trader or a Stock Investor is a financial markets professional or firm, who buys and sells financial instruments, such as stocks and bonds. The individuals or firms trading in a principal capacity sometimes call themselves stock traders or simply traders. “


investment banking players6
Investment Banking - Players

Stock Analyst – “An analyst will write reports on the companies they are supposed to cover, trying to describe the businesses and their opinion of the companies investment potential, usually from a fundamental analysis standpoint.... Previously, analysts were said to obtain lots of information (especially from clients of their investment bank), via exclusive meetings with upper management. Regulation FD (Fair Disclosure), is said to prevent most of this from happening at present. ”


financial impacts
Financial Impacts
  • The SEC set deadlines mandating when specific requirements needed to be met for brokerage firms.
  • Brokerage firms were informed that fines would be levied if they were not in full compliance by the deadline.
financial impacts8
Financial Impacts

“In 2004, the Bank of America set a record by agreeing to pay $10m fine to the SEC for failing to retain documents. In 2002, Morgan Stanley was one of a group of five banks that were fined a total of $8m by the SEC for not ensuring that emails were being kept for three years "in a readily accessible manner," as required by rule 17a-4 of the Exchange Act.”


financial impacts9
Financial Impacts

“Bank of America has agreed to pay a total of $375 million, consisting of $250 million in disgorgement and $125 million in penalties. The money will be distributed to the mutual funds and their shareholders that were harmed as a result of market timing in Nations Funds and other mutual funds through Bank of America. “


technical hurdles
Technical Hurdles
  • Companies are required to monitor their end user from the moment they are hired by the corporation and access the companies systems.
  • Multiple technical groups collaborate to perform appropriate monitoring and storage of sensitive information.
employee id
Employee Id

Each employee is assigned a unique identifier that is different than their social security number.

This ID cannot be assigned until the employee is entered into the HR Database.

user population
User Population
  • Many aspects of the user populations must be regulated.
  • Process flow was implemented to capture and populate a centralized data repository that can be referenced by employees to determine if communication is permissible between parties.
  • LDAP enable the repository for access.
  • What happens if an employees name changes?
  • Identity Management
electronic communication servers
Electronic Communication Servers
  • Exchange
  • Lotus Notes
  • TAO
  • SameTime
  • LCS
  • BlackBerry
methods of communication
Methods of Communication

Multiple forms of Communication

  • Electronic Communication
    • Email Distribution Groups (DG’s)
    • Email Distribution Lists (DL’s)
  • Instant Messaging
    • Microsoft LCS
    • SameTime
  • BlackBerry
  • VRU

Note: The SEC mandated that all electronic communication must be captured, but many companies such as Bank of America may voluntarily choose to include voice monitoring in the near future.

  • SEC Regulations affect the technical landscape for financial institutions
  • Diverse technical hurdles to overcome
  • Identity Management
  • Multiple forms of communication
reference material
Reference Material
  • http://en.wikipedia.org/wiki/U.S._Securities_and_Exchange_Commission
  • http://www.sec.gov/news/press/2004-33.htm
  • http://www.computerwire.com/industries/research/?pid=17A1A08D-EFFC-445F-B39F-6341E2A9F576