Information barrier

Procedures that stop material nonpublic information passing between departments, such as corporate finance and research or trading. Also called a firewall, it is the central control against misuse of such information.

Where you will meet it

Information barrier appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Propose practices and procedures that stop breaches of the ethics Code and the Standards of Professional Conduct before they occur
  CFA Level II · Ethical and Professional Standards

  “The central control is an information barrier: interdepartmental communication cleared through compliance or legal, watch, restricted and rumour lists, written documentation of procedures and of enforcement, and tighter review of proprietary trading while the firm holds inside information.”

• Propose practices and procedures that head off breaches of the Code and Standards under Standard II, Integrity of Capital Markets
  CFA Level III · Ethical and Professional Standards

  “The core defence is an information barrier around anyone who may hold material nonpublic information: communication across it cleared by compliance, physical and systems separation, and documented enforcement.”

See also

Material nonpublic information · Nonpublic

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
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