The U.S. Securities and Exchange Commission issued an alert to brokerage firms designed to help them prevent and detect unauthorized trading in client accounts.

The alert, which was issued by the SEC’s Office of Compliance Inspections and Examinations, warns that unauthorized trading can include rogue trades in customer, client, or proprietary accounts or trades that exceed firm limits on position exposures, risk tolerances, and losses. And, it says this sort of unauthorized trading can be carried out by traders, assistants on trading desks, portfolio managers, brokers, risk managers, or other personnel, including those in administrative positions in a firm’s back office.

The warning notes that changes in trading patterns, a high volume of trade cancellations or corrections, manual trade adjustments, or unexplained profits for a particular trader or client may warrant additional scrutiny. And, it suggests compliance measures that firms might want to use to protect themselves and their clients from unauthorized trading, such as stress testing and independent trading reviews.

“One critical element in mitigating the risks posed by unauthorized trading is to have independent and mutually reinforcing controls. Toward this end, firms may want to consider actively engaging such control functions as operational risk, audit, legal and compliance to work closely with management in performing an independent identification of risks and practices that could permit unauthorized trading,” it says.

The alert says that a firm’s supervisory structure, both on the trading desk and across the firm, is its most important control. “Strong and effective business line supervision at all levels is essential both to promote an overall culture of compliance and to detect and prevent unauthorized trading,” it says.

“Unauthorized trading is not a new problem, and the risks it poses should be a perennial concern to financial firms as well as to regulators,” said Carlo di Florio, director of OCIE. “We hope that the observations shared in the risk alert will be helpful for firms as they review their compliance and supervisory controls to detect and deter unauthorized trading.”