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Why examiners care
Why the rule exists
Adviser staff often have advance knowledge of client trades, research recommendations, and portfolio shifts. Without controls, staff could trade ahead of clients (front-running) or use client information for personal gain. The personal-trading framework is the structural defense.
The reporting cadence
- Initial holdings — within 10 days of becoming an access person; data current as of no more than 45 days prior.
- Quarterly transactions — within 30 days of quarter end.
- Annual holdings — within 45 days of year end.
Reports must include all reportable securities accounts, including those of immediate family members in the same household.
Pre-clearance
Pre-clearance is required by rule for IPOs and limited offerings. Most firms extend pre-clearance to a broader set of categories — typically equity transactions above a threshold, options, and any securities the firm is recommending or transacting for clients. Approvals and denials are logged, with the CCO retaining the records as part of books and records.
Surveillance
Effective personal-trading surveillance compares the access person's reported transactions to brokerage statements (received under duplicate-statement arrangements with the broker), looks for patterns that may indicate front-running or use of MNPI, and reviews timing relative to client trades.
Common deficiencies
- Reports not filed on time, or filed without a brokerage statement match.
- Pre-clearance bypassed without a documented exception.
- No surveillance comparing access-person trades to client transactions.
- Family-member accounts not reported.
How StratiFi thinks about personal trading
Personal trading is one of the easiest areas for an examiner to find a real deficiency — and one of the easiest for a firm to operate well. The discipline is workflow: a clear list of access persons reviewed quarterly, a pre-clearance process that everyone uses, brokerage-statement reconciliation each quarter, and a CCO who reviews the patterns rather than just collecting the reports.
Frequently asked questions
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Who is an access person?
Any supervised person with access to nonpublic information about client transactions or portfolio holdings, or who is involved in making recommendations to clients. In small firms, most staff qualify. -
Are spouse accounts covered?
Yes — accounts of immediate family members in the same household, with limited exceptions for accounts where the access person has no influence or control. Most firms err on the side of including these accounts. -
Is pre-clearance required for all trades?
By rule, only for IPOs and limited offerings. Most firms voluntarily extend pre-clearance to a broader set of categories to make surveillance more effective.