Tom Atkinson, president and CEO of Market Regulation Services Inc., reminded corporate directors of their responsibility to help prevent illegal insider trading.

Speaking Friday at the 2005 Corporate Governance Conference in Toronto, Atkinson discussed the problem of insider trading, and the efforts by RS to help stamp it out.

He highlighted the role of corporate directors in that effort, too. “The tone for a company and its ethical standards are set at the top. It is management that puts policies and procedures in place to contain the information. It’s the board’s responsibility to ensure management has done that,” Atkinson said.

“Board members are also deeply involved in the decisions that lead to material developments. Directors are at the centre of the process. So directors shouldn’t be content with putting a tick in the box that the company has policies to contain information. Directors should ask specific and pointed questions about how information is being contained,” he noted.

“Insider trading is conducted by rogue individuals,: he added. “However, when the finger is pointed at who did the illegal insider trading, the ultimate responsibility may well rest with those who provided inadequate oversight that might have prevented the illegal trading in the first place.”

Atkinson also advised issuers to cooperate with the regulators to avoid any problems. :For example, when you are beginning negotiations which may lead to a significant material event, advise RS. We will initiate a stock watch and pay particular attention to price and volume movements of your stock ahead of the material announcement. But when RS calls – take the call. Otherwise, you could find your stock halted – or worse – your company could be reported for not cooperating with the regulator,” he said. “This is not a threat. This is what happens.”

He counseled firms to call RS if they suspect that an insider has inadvertently conducted a potentially illegal insider trade. “We can unwind the trades right away – before anyone is harmed.”