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SIFMA Urges Ninth Circuit to Uphold Ruling on In-House Accounts

The Securities Industry and Financial Markets Association (SIFMA) last week filed an amicus brief urging the Ninth Circuit to uphold a ruling that would allow brokerage firms to require employees to keep personal trading accounts in-house, saying the policy is needed to help detect violations of federal securities laws, like insider trading. Weil, Gotshal & Manges is counsel to SIFMA.

SIFMA's filing is in response to an appeal of a federal court's 2011 ruling dismissing two purported employee class actions, which claimed that securities firm Morgan Stanley's requirement that employees keep their stock accounts in-house violated a California law that prevents employers from mandating that their employees buy from the company. The district court held that the plaintiffs' claims were preempted by federal securities regulations that require financial firms to monitor employee trades.

SIFMA argued in its amicus brief that Congress and regulators intended financial services firms to have the flexibility to make their own rules based on their particular situations, and overturning the district court's ruling would preclude these firms from implementing procedures that federal regulators have endorsed as an acceptable, if not the preferred, method of ensuring that their employees comply with federal securities laws aimed at curbing insider trading and other abuses.

Weil's team included Employment counsel Allan Dinkoff and Appellate practice group associate Adam Banks.