Exercise
Answer true or false.
1. The SEC requires broker-dealers to implement specific policies and procedures in order to properly separate its various branches so that inside information is not improperly exchanged.
2. A firm’s Chinese wall policies should define how a security would be taken off of a watch list or a restricted list.
3. Regarding information exchange, a firm’s Chinese wall policies should ensure complete separation between certain departments within the firm.
4. Under the SEC rules on Chinese walls, it is sometimes allowable for a non–investment banking employee to come into contact with material, nonpublic information.
5. To ensure that a firm’s Chinese wall system remains effective, the firm must train only its principals on its policies and procedures related to insider trading.
Answers
1. False. The SEC does not require a broker-dealer to implement any specific policies or procedures related to the establishment of Chinese walls, which are intended to block the improper exchange of nonpublic, material information. Instead, it simply sets forth the minimum requirements for Chinese walls