What should a brokerage firm do if it possesses material non-public information?

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When a brokerage firm possesses material non-public information, it is imperative to restrict employee trading in those securities to prevent insider trading violations. Material non-public information refers to information that has not been released to the public and could significantly influence an investor's decision to buy or sell a security. Allowing employees to trade based on such information creates an unfair advantage and undermines market integrity.

Restricting trading helps maintain compliance with securities laws and protects the firm from legal repercussions that could arise from improper use of insider information. This practice is part of the firm's duty to ensure a transparent and equitable trading environment for all investors. By implementing policies that limit trading, the brokerage firm upholds ethical standards and contributes to a fair market.