Insider Trading Policy Example – Corporate Governance Policies

Insider Trading Policy Sample

In this article, we’ll look at the key elements that make up an example Insider Trading Policy. We’ve included some starter/boilerplate information to help you get started writing this policy for your company. If you’re looking for help in setting up your policies & procedures or employee manual/handbook, our team can assist.

Insider Trading Policy Template

The following are the main elements that should be included in your Insider Trading Policy:

1. Title Page

• Policy Title: Insider Trading Policy
• Company Name: The name of the organization implementing the policy.
• Policy Number (if applicable): For easy reference within the company’s policy structure.
• Version Control: Date of creation, last review, and version number.
• Effective Date: The date the policy becomes operational.
• Approval Authority: Name and title of the individual who approved the policy.

2. Purpose/Objective

• A brief statement explaining why the Insider Trading Policy exists. This section outlines the policy’s purpose in relation to the company’s goals, regulatory requirements, or ethical standards.
• Describe what problem or issue the policy addresses.
• Example Purpose/Objective:

The purpose of this policy is to prevent employees and directors from engaging in stock trading based on material non-public information, ensuring compliance with legal and ethical standards. It aims to protect the integrity of the financial markets and maintain investor trust by prohibiting the misuse of confidential information for personal gain. By enforcing these guidelines, the company seeks to uphold corporate governance principles and avoid potential legal repercussions. This policy underscores the commitment to transparency and fairness in all trading activities related to company stock

3. Scope

• A description of who the Insider Trading Policy applies to (e.g., employees, contractors, vendors).
• Specify any exceptions to the policy.
• Explain departments or roles affected, if necessary.
• Example Scope:

This policy applies to all employees and directors, prohibiting them from buying or selling company stock when in possession of material non-public information. It ensures compliance with legal and ethical standards, safeguarding the integrity of the company’s operations and protecting against legal repercussions. The policy covers all forms of trading and extends to tipping others about such information. It is a crucial component of the company’s corporate governance framework, promoting transparency and fairness in financial dealings. Violations can lead to severe consequences, including disciplinary action and legal penalties

4. Definitions

• Clarify any key terms or jargon used within the Insider Trading Policy to ensure understanding.
• Avoid assumptions about familiarity with industry-specific terminology.
• Example Definitions:

The Insider Trading Policy restricts employees and directors from buying or selling company stock when they possess material non-public information. This policy aims to prevent unfair advantages and maintain market integrity. It falls under Corporate Governance Policies, ensuring that all trading activities are conducted ethically and in compliance with legal standards. Violations can result in severe consequences, including legal action and termination of employment. The policy underscores the importance of transparency and fairness in corporate operations

5. Policy Statement

• A detailed outline of the Insider Trading Policy itself, including all rules, expectations, and standards.
• It should be direct and clear so that it leaves no ambiguity about the company’s position or requirements.

6. Procedures

• Step-by-step instructions on how to implement or comply with the Insider Trading Policy.
• Include any forms, tools, or systems that employees must use.
• Describe the responsibilities of different roles in ensuring adherence to the policy.
• Example Procedures:

Employees and directors must refrain from trading company stock when in possession of material non-public information. They are required to consult the legal department if uncertain about the information’s status. Trading windows are established, typically following public disclosures, during which trading is permitted. Pre-clearance from the compliance officer is mandatory for trades by directors and certain employees. Violations may result in disciplinary action, including termination. The policy also extends to tipping others about non-public information. Regular training sessions are conducted to ensure understanding and compliance

7. Roles and Responsibilities

• List the roles responsible for enforcing or overseeing the Insider Trading Policy (e.g., managers, HR).
• Define who is accountable for reporting, monitoring, and updating the policy as needed.
• Example Roles and Responsibilities:

Employees and directors must refrain from trading company stock when in possession of material non-public information. They are responsible for maintaining confidentiality and ensuring compliance with the Insider Trading Policy. The policy mandates that any potential insider trading activities be reported to the compliance officer. Directors and employees must also avoid tipping others with non-public information. Training sessions are required to ensure understanding and adherence to the policy. Violations can lead to disciplinary actions, including termination and legal consequences. The compliance team is tasked with monitoring and enforcing the policy, providing guidance, and updating procedures as necessary

8. Compliance and Disciplinary Measures

• Outline how compliance will be monitored or enforced.
• Describe any consequences or disciplinary actions for failing to follow the policy, including the escalation process.

9. References and Related Documents

• Include links or references to any laws, regulations, or company guidelines that support the Insider Trading Policy.
• Reference related company policies that connect or overlap with the document.

10. Review and Revision History

• State the review cycle (e.g., annually, biannually) and who is responsible for reviewing the Insider Trading Policy.
• A history section that lists all revisions made to the document, including dates and reasons for changes.

11. Approval Signatures

• Signature lines for key decision-makers who have authorized the policy (CEO, department head, HR manager).

12. Appendices or Attachments (if needed)

• Additional information, FAQs, or case examples to provide more context or clarify how the Insider Trading Policy applies in specific situations.
• Any relevant forms or templates employees need to complete.