What is your opinion on this issue, keeping in mind CFA’s code of ethics?
I am not sure of the details. Did he disclose his ownership at the time of the presentation. I guess if he did, there is nothing wrrong with it? Assuming he had arrived at the conclusion that it is a good buy during his own time. If he arrived at the conclusion while on the clock, then his employer should get the opportunity to act first… But then how do you prove when he studied the stock? Also, even if he did it on his own time. The question is why did he not do it at work? He was depriving his employer of his skills…
“Resignation and Lubrizol related share activity: Mr. Sokol purchased 96,060 shares of Lubrizol at a limit price of $104 per share between January 5 and 7, 2011. He presented the idea of Berkshire acquiring Lubrizol to Buffett on January 14 or 15, 2011, and again after a January 25 meeting with Lubrizol’s CEO. Berkshire Hathaway’s board voted to acquire Lubrizol at $135 per share on March 13, 2011. [9] At the very least, there is an “appearance of impropriety” here. Both Sokol and Buffett said that they do not believe anything “unlawful” had taken place. An investigation will likely determine if those assertions will be borne out. What is hard to dispute is that this was unethical and not up to the standards of integrity that Berkshire Hathaway espouses. Essentially, Sokol bought $10 million in stock and then presented the company to his boss to buy, which he subsequently did, netting Sokol $3 million in short order. Sokol has repeatedly said that he had no authority whatsoever with regard to the transaction. Essentially, he is saying that he didn’t think there was much chance at all that Buffett would acquire Lubrizol, but he thought it was a good company and he was happy to own the stock for his personal account. Notwithstanding Mr. Sokol’s assertions, he knew that there was the potential for a Berkshire buyout, which was not public information. Mr. Sokol was FACILITATING the deal. That was not public information. If it had been, the price of LZ would have been moving substantially higher.” Read more: http://www.benzinga.com/media/cnbc/11/03/968252/david-sokols-lubrizol-trades-may-not-be-illegal-but-they-were-certainly-unet#ixzz1IcPhIIrS Sounds to me like he was front running the trade ahead of shareholders who should have had the first opportunity before he bought it for his own account and he was trading on material nonpublic information. Shady shady… this would be a ethics code violation. With an investigation, it may become illegal.