Revisiting insider trading in the debt markets: lessons for debt investors and members of committees in bankruptcy cases

Purpose – The purpose of this paper is to draw attention to the Securities and Exchange Commission's (SEC's) insider trading principles as they apply to trading in debt securities based on the Commission's recent settlement with Barclays Bank. Design/methodology/approach – The paper describes the SEC's complaint that Barclays purchased and sold securities while it was aware of material nonpublic information and discusses the implications of the resulting settlement and lessons that should be learned, including a warning for members of committees in bankruptcy cases, the critical significance of receiving material information under a confidentiality agreement, the uncertain legal standing of so‐called “big boy” letters, and the importance of “information barriers” being demonstrably effective. Findings – While the law of insider trading was developed predominantly in the equity markets, the Settlement demonstrates that the SEC remains committed to exporting its insider trading principles to the markets for other securities. Practical implications – Every financial institution should be aware of when a part of its organization is receiving material, non‐public information from a public company, restrict trading while the firm is aware of this information, or alternatively maintain and document procedures that separate that information from individuals who are making investment decisions, and develop systems to ensure compliance with applicable bankruptcy laws, Orginality/value – The paper provides practical guidance from experienced securities lawyers.