What is the typical function of implementing blackout periods and restricted lists?

The implementation of blackout periods and restricted lists serves primarily to create firm-tailored prohibitions and enhance client protections. Blackout periods are intervals during which certain individuals, such as employees or insiders, are restricted from trading a company's securities to prevent any appearance of insider trading. These periods help mitigate the risk of trading based on non-public information, ensuring that all investors have a fair chance to respond to market information.

Restricted lists, on the other hand, are established by firms to identify securities that are under review for potential trading or other sensitive matters. By restricting trading in these securities, firms protect clients from the adverse effects of potentially problematic or unethical trading activities, safeguarding their interests.

This combination of practices forms an essential part of compliance and ethical behavior within investment advisory firms, aiming to maintain fair pricing in the market and uphold the trust of clients. Thus, the typical function of implementing blackout periods and restricted lists is fundamentally rooted in tailored prohibitions specific to the firm, alongside a strong commitment to client protection.