Glossary term
Restricted List
Subject: Compliance and Regulation, Market Conduct and Securities
Also known as: Restricted securities list, Trading restriction list
A restricted list is a confidential internal list of securities in which a firm and its staff may not trade or advise, because the firm holds inside information or has a conflict.
Explanation
Compliance teams put a company on the restricted list when the firm learns something that could move its share price, for example when it is hired to advise on a takeover, or has a conflict with a client. Once listed, employee trading, proprietary trading and often research publication in that name stop until the matter is public or ends. The list itself is confidential, since its existence hints that something is going on, and only compliance and a few others see it. Staff check trades against it through pre-clearance, and automated systems block orders. Many firms also keep a separate watch list, where names are monitored quietly without a ban. A missed entry, such as a trader buying a name the bank is advising on, is the sort of lapse that invites an inside-information inquiry.
Example
An investment bank is mandated to advise a listed pharmaceutical company on a merger. Compliance adds the company to the restricted list that day. When a trader tries to buy its shares for the bank's own book, the system blocks the order and alerts compliance. The name stays listed until the deal is announced.
Not to be confused with
- Watch list
- A watch list means names are monitored quietly for unusual trading. A restricted list actually bars trading and advice in those names.