Fannie Mae’s 5,000 employees were told they cannot buy or sell their company’s shares for the foreseeable future, according to the Washington Post, citing an E-mail sent by to employees. The paper said that spokesman Charles V. Greener confirmed the message’s authenticity and said Fannie Mae took the step because it “felt it was the prudent course of action.” He provided no further comment.
The embattled mortgage giant, which is mired in an accounting scandal, is in the process of crafting a multibillion-dollar restatement and dealing with several federal investigations.
Fannie Mae told its rank and file that it blacked out trading in the stock so that the employees don’t accidentally trade illegally on material, non-public information, reported the Post. The newspaper added that according to the e-mail, the reason for the trading ban is Fannie Mae’s “inability to make public filings with the Securities and Exchange Commission, the increasing number of employees supporting our restatement effort, and the continuing progress of internal and external reviews and investigations.”
According to the Post, the E-mail also instructed recipients to “cancel any outstanding instructions you have given your broker to purchase or sell shares in the future” and set forth restrictions for exercising stock options.
The Post added that a small number of Fannie Mae executives who have access to sensitive financial information have not been able to trade the company’s stock since September. That month the Office of Federal Housing Enterprise Oversight released a report detailing the company’s accounting policies and internal controls. OFHEO also singled out Fannie Mae’s chief accounting officer, J. Timothy Howard, for failures in overseeing the organization’s controller’s office and its audit functions.
According to the newspaper, Fannie Mae said that the blackout period could be lengthy for some employees; they may not be able to trade the stock until the company finally issues its restatements. Others could see the blackout lifted as more information about the scope of the restatement becomes public.
Mortgage company Freddie Mac imposed a similar stock-trading ban on its employees in January 2003 after it announced that it would delay filing its financials and expected to restate results, according to the Post, citing a Freddie spokeswoman. Freddie Mac briefly lifted the trading ban late that year for selected employees who were not involved in putting together the restatement.