How to Handle a FINRA Inquiry About Insider Trading

If FINRA’s Sonar picks up suspicious trading before a major announcement – a spike in price and/or volume – they start a routine where they match trading patterns against anyone who had prior knowledge that this development was coming – that includes a company’s insiders – the people subject to blackouts from trading based on their possession of material nonpublic information.

For a merger, this routine involves sending out letters – known as “Finra Chronology Letters” – to both companies involved in the deal, asking for a list of who knew about the deal before it was announced.

It’s not just both companies involved in the merger that will get these letters – all the advisors & other parties that worked on a deal will get them too, from the investment bankers to the lawyers & accountants to the financial printers.