CalPERS (the world's largest pension fund) has proposed a new policy on insider trading by its employees (CalPERS is against it, of course). But Keith Paul Bishop is dubious. While I agree with Bishop's take that the policy is probably unnecessary and also badly designed, I suspect this is a case in which CalPERS is taking a belts-and-suspenders approach to ensuring that it has minimal organizational risk (e.g., control person liability) in the event that one of its employees goes rogue. As a client briefing letter from Pepper Hamilton explains:
As a result of the Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA), insider trading policies have become a mainstay of corporate compliance programs. Since the enactment of ITSFEA, federal regulations impacting insider trading have further evolved as a result of the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The heightened scrutiny of the insider trading landscape today compels consideration by public companies to adopt appropriate policies to prevent insider trading and to enforce compliance with these policies. ...
Controlling person liability would not apply where the "controlling person acted in good faith and did not directly or indirectly induce" the violation. However, such exposure to liability would exist where a "controlling person" allows access to material non-public information (about itself or another entity) without implementing procedures to prevent insider trading or improper disclosure by the "controlled person."
