Fund houses put extra checks in place to curb insider trading

A leading mutual fund has asked top executives to stop using encrypted messaging platforms such as WhatsApp on their work phones. Some brokerages are installing monitoring applications on the terminals and phones of key employees, while another firm wants to track investments by family members of staff. These are some of the actions that various domestic asset management companies and broking firms are taking or considering in the wake of front-running and insider-trading cases surfacing in recent times. Many of these financial services firms are looking to add such conditions to employee contracts, despite grumbling that this would infringe privacy.

The increased surveillance is to monitor who the employees are in touch with during work hours, to track any leaks of price-sensitive information. Such tools would serve as a deterrent against unethical practices, said market participants.

Some finance firms are employing analytical tools to look for patterns in all the data recorded, akin to how the market regulator and stock exchanges keep tabs on insider trading. In the past few months, at least three cases involving insider trading have come under regulatory scrutiny, said people with direct knowledge of the matter. In such instances, the institution itself could be exposed to regulatory action.