Insider Trading Prevention Tip

Top 7 Insider Trading Prevention Tips

Business Intelligence 4 Mins Read January 18, 2023 Posted by Abdul Aziz mondol

Insider trading is a serious problem. It can cause irreparable damage to your company’s reputation, as well as lead to hefty fines and even jail time for those who commit the crime. Fortunately, there are steps you can take to prevent insider trading from happening at your company:

1. Do A Background Check

Check the employee's background

Check the employee’s background and see if he has any criminal or financial record. If he does, then you should avoid hiring him as it could be very harmful to your business in the future.

You can also ask him whether he has any debts to pay off or any pending legal issues before going ahead with the hiring process. You can find a criminal solicitor in Sydney who could perform these background checks.

2. Hire An Outside Firm To Review Procedures

Small B Account which offers bookkeeping services in Melbourne suggested that hiring a third party to review your policies can be an effective way to prevent insider trading. Make sure that the firm you hire is objective and has no vested interest in the company, so they will not try to protect someone who may have violated their policy.

Also, make sure that the firm has experience in this field and has a good reputation for doing thorough reviews. You don?t want to invest a lot of money into getting them on board only to find out later that their report was inaccurate or incomplete because they were lacking expertise! Lastly, make sure that any firm you hire is not too expensive?you don?t want them taking advantage of your company simply because they know how much money it makes!

3. Look OUT FOR Warning Signs

The second step is to look for warning signs. Sometimes, insiders will tip their hands and give away their intentions by engaging in unusual trading activity.

For example, an insider might buy a bunch of company shares just before earnings are announced?and then sell them right after the news hits. Such trades may be based on non-public information that could only have been obtained by someone with inside knowledge of a pending event or development at the firm.

4. Talk To Consultants And Expert Networks

Talk To Consultants And Expert Networks

It?s common for insiders to use consultants and expert networks to communicate sensitive information. Consultants are hired by companies or individuals to provide advice on a particular subject matter, while expert networks consist of people with similar expertise who are brought together via online websites or conferences.

What should you look for when hiring an insider? People who have worked at companies in similar industries as yours?for example, someone who previously worked at IBM but now works at Google might know some things about how both of those companies operate.

This is useful because if there were any changes made recently at either company then they could tell us what those changes were!

5. Create And Enforce Policies

You can?t expect people to follow your insider trading prevention policies if you don?t have them in place or if you don?t take steps to monitor their compliance, but having a policy is just the first step toward ensuring that everyone follows it.

The next step is enforcing the policy by taking action against those who violate it. That usually means firing an employee who violates the policy, but there are other ways to enforce compliance as well (such as suspending them).

Your insider trading prevention policy should be easy for employees to understand and implement, but even more important than making it simple is making sure that employees know exactly what they need to do when they commit a violation so that any punishment fits both the violation itself and your organization’s culture (i.e., no matter how much money someone makes or how many years they’ve spent at your company, getting fired isn’t necessarily going to ruin their life).

6. Staying Alerted Via Watch Lists

lists from an insider trading lawyer

Watch lists are another way to stay on top of insider trading activity and are particularly useful for investors who want to keep an eye on a company but don’t have the time or money for full-scale monitoring.

Watch lists from an insider trading lawyer allow you to set up alerts when someone buys or sells stock in a specific company, which is useful in identifying potential cases of insider trading.

When creating a watch list, it’s helpful to think about what kinds of transactions you’re interested in tracking.

Do you only want information about large transactions? Or do smaller trades matter too? How far back should your data go? These questions can help determine the type of watch list you create and how long it will track information for.

Once you?ve created your watch list, make sure that any suspicious red flags are brought to your attention within 24 hours by taking action on them immediately; this will help prevent someone from profiting off their inside knowledge before anyone else knows about it!

Read Also: Your Guide to In-Depth Information on Net-Net Stocks

7. Be Proactive

There are two types of insider trading prevention measures: proactive and reactive. Proactive measures are more effective, and cost-effective and can be implemented before insider misuse even occurs.

A single person or small team can take proactive measures that may prevent future problems from occurring in the first place. Reactive measures are usually implemented after an incident has occurred and they are often ineffective because they require someone to monitor what?s going on around them continuously.


Insider trading prevention is a challenge, but there are tools you can use to protect your company from it. If you feel like you’re not equipped with the right knowledge, reach out to an expert who can help.

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Abdul Aziz Mondol is a professional blogger who is having a colossal interest in writing blogs and other jones of calligraphies. In terms of his professional commitments, he loves to share content related to business, finance, technology, and the gaming niche.

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