Employee compliance monitoring is software that watches a financial firm's own staff: the shares they trade for themselves, their conflicts of interest and the gifts they receive. Banks, brokers and fund companies must show regulators that their employees do not misuse what they learn at work.
Here is why it is needed. An employee at a bank or a broker may learn about a company's results or a deal before the public does. Trading on such information is called insider trading, and it is illegal. In India, SEBI's rules on insider trading require firms to keep a list of employees who see such information, and to approve in advance their trades above a value set by the firm. A conflict of interest is a situation where an employee's private interest could affect their work. Gifts from clients can create one.
Consider a research analyst at a brokerage in Mumbai who wants to buy shares of a cement company. She submits a request in the software before she trades. This is called pre-clearance. The software checks the firm's restricted list, the list of companies that staff may not trade in, often because the firm is working on a deal with them. The cement company is on the list. The software declines the request, and records her request and the answer.
The software also does three other jobs. It collects each employee's holdings and trades, often directly from their brokers. It records every gift above a set value, and every outside job or directorship. And it asks employees to confirm each year that they have followed the rules.
It often works with communications compliance and archiving, which records staff calls and messages and flags possible misconduct. Each breach and its outcome is recorded in the firm's GRC platform. Quality checks on calls with customers, such as automated quality assurance, are a separate tool. This is one part of the wider work of anti-money laundering and compliance.