In-house legal leaders might consider setting remote-work ground rules for employees who share a household with someone who has access to sensitive business information, recent federal insider-trading cases suggest.  

In February the Securities and Exchange Commission charged Tyler Loudon with insider trading based on information he obtained from his wife, a bank executive, when she discussed an upcoming M&A deal during business calls while they were both working from home. 

The complaint follows an earlier case in which the SEC charged another at-home worker with acting on inside information he obtained from his girlfriend, without her consent, while they both worked from home. 

The cases show the temptation — and the vulnerability — that employees face when the protections that come from working in an office or other workplace environment don’t apply. 

“While flexible work environments … can be beneficial, companies must consider the potential compliance pitfalls that accompany remote work,” Teresa Goody Guillén, a partner with BakerHostetler, said in an alert about the two DOJ cases. 

Vulnerable information

In the February case, Loudon is said to have taken advantage of his remote working conditions “and his wife’s trust” to obtain material nonpublic information from his wife’s work calls, making $1.76 million in profits from insider trading, Eric Werner, an SEC regional director, said in announcing the charge. 

Loudon’s wife worked on M&A deals for BP, the British energy multinational. After he overheard her talking about the company’s planned acquisition of TravelCenters of America Inc., the complaint says, he bought 46,450 shares of the travel company’s stock in anticipation of the deal.

“As a result of the announcement, TravelCenters stock rose nearly 71%,” the SEC says.  

In the earlier case, Steven Teixeira, chief compliance officer at a payment processing company, obtained material nonpublic information about M&A deals that were in the works from the laptop of his girlfriend, an investment bank employee, while they were both working from home. 

Teixeira “used the information to purchase call options on several issuers ahead of the announcement of the deals and tipped the information to his friends,” one of whom was a broker-dealer, the complaint says.

Teixeira made $28,600 and the broker-dealer more than $730,000, the SEC says. 

The SEC called Teixeira’s actions “brazen betrayals of trust” who “misappropriated information from his girlfriend’s laptop.”

Ground rules

In-house legal leaders have a role to play in protecting employees from both the temptation and the vulnerability of at-home work when others in their household conduct at-home work involving sensitive information.

“While individuals are working from home, meetings should be conducted in private,” Goody Guillén says in her alert. “If privacy is limited, they should consider the best practices of wearing headphones; using room partitions or dividers, privacy computer and phone screens, and strong passwords; and being mindful to always lock devices when not in use.”

What’s more, she says, “employees should be trained on their duties to ensure that material nonpublic information remains confidential and on how to ensure confidentiality…. It’s important to remind those who may be near during confidential conversations that they may overhear confidential information, but they should not share it or act on the information.”