An information barrier commonly referred to as a “firewall” is the most widely used
approach for preventing the communication of material nonpublic information within
firms. It restricts the flow of confidential information to those who need to know the
information to perform their jobs effectively. The minimum elements of such a system
include, but are not limited to, the following:
■ substantial control of relevant interdepartmental communications, prefera-
bly through a clearance area within the firm in either the compliance or legal
department;
■ review of employee trading through the maintenance of “watch,” “restricted,”
and “rumor” lists;
■ documentation of the procedures designed to limit the flow of information
between departments and of the actions taken to enforce those procedures; and
■ heightened review or restriction of proprietary trading while a firm is in posses-
sion of material nonpublic information.