List of securities that cannot be bought or sold by employees or other individuals
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A Restricted List is a list of securities that a bank’s employees are prohibited from buying or selling, either themselves or via any other person or third party.
When are stocks placed on a restricted list?
Stocks of an issuer are placed on the Restricted Trading List when either:
A material transaction in which the bank is involved in has been generally disclosed and the bank is in possession of, or may obtain, material, non-public information concerning the securities issuer (thus putting it in the position of someone capable of insider trading); or
The bank is engaged with the company on non-public activity, such as mergers and acquisitions work, affiliate ownership, or underwriting activities or other distribution of the issuer’s (the company’s) securities.
What does it mean for securities that are placed on a restricted list?
When a securities issuer is subject to trading restrictions by being placed on a bank’s Restricted Trading List, unless the Chairman of the bank otherwise approves trading (in consultation with the bank’s Legal and Compliance Departments), subject to certain exceptions, the bank will not trade as a principal in securities of the issuer or publish any equity research reports concerning the issuer.
In addition, bank employees cannot personally trade in securities of any issuer subject to trading restrictions by virtue of being on the Restricted List.
Generally, securities will stay on the Restricted List until the securities issuer announces that the material transaction has been completed or has been aborted, or until the bank’s Compliance is otherwise satisfied that the bank does not possess, and will not come into possession of, material non-public information about the securities issuer.
Trading securities on a restricted list can result in serious legal and financial repercussions.
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