If there’s a Buy recommendation on a stock, and a covered employee owns the stock, can he use options for example to hedge his position? If the answer is yes, can he hedge knowing that a recommendation to change the rating to sell might be approved by the review committee in the near future? say, tomorrow? And in a third scenario, let’s say the recommendation to sell is approved, can he use options while stocks in clients’ accounts are still being liquidated?
1.i would say wrong, unless maybe if he get it precleared 2 and 3 sound very wrong Are these actually questions with answers or just hypotheticals?
No. My reasoning is that if you hedge a stock, it means you are not sure of your own rating. And you are thinking about yourself first then your clients.
Grey area, I think an employee would be allowed to hedge their own position. The firm might have a blackout period where EEs are not allowed to trade their personal positions before and after a recommendation is released to clients. No No.
Hypothetical questions. For whatever reason, I remember reading somewhere that someone used options and got away with it, but I can’t remember where. I think it was in a context of a fund not allowed to have more than 5% of a particular stock of his fund’s total value, and used options on a stock that reached the max allowed value as he thought the price will go up. As if options didn’t count. He got away with it. I know it’s unrelated to my questions above, but in a way, similar.