Summary: Pursuant to a congressional request, GAO reviewed Securities and Exchange Commission (SEC) oversight of broker-dealer Chinese Walls, which are the policies and procedures for deterring and detecting the abuse of material, nonpublic information (MNPI) through insider trading.
GAO found that: (1) clearly defined standards have been developed, which consider the nature of a broker-dealer's business and are sufficiently detailed for broker-dealers to use in establishing Chinese Walls, and for SEC and the self-regulatory organizations to use in assessing compliance with the Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA); (2) the standards established address each of the minimum requirements that SEC identified in its March 1990 report; (3) the standards apply to New York Stock Exchange and National Association of Securities Dealers members which include all registered broker-dealers doing securities business with the public, which accounts for 99 percent of all securities business revenues; (4) the other exchanges are developing standard procedures or forms to help their broker-dealer members comply with ITSFEA Chinese Wall requirements; and (5) all exchanges will require their members to review employee securities trading for MNPI abuses.
