I am an analyst at a relatively small shop. There are a handful of analysts, including myself. Like any other investment firm (buyside), we are required to submit our brokerage statement every month. Everyone does this except one analyst who claims that he doesn’t invest in stock personally, which is a legitimate reason. During happy hours one day, we went out with a group of friends (him, me and other friends) and he was in a moody state (not talking to anyone, just drinking hard)… and I asked him what was wrong… and he told me that he lost a ton of money investing in XYZ in the last two weeks. I went about my business not thinking much of it… until I later realized the two conflicting info (losing money on a stock and yet not submitting a brokerage statement). I confronted him and he told me he doesn’t recall our conversation and reiterate that he doesn’t invest in stock. To me… something just simply doesn’t seem right. Now… normally, I wouldn’t care about anyone’s personal investment/behavior but I took exception to this lie. We invest in very illiquid securities at time (takes many months just to build a sizeable position), and his purchases could have a material impact. I confronted our CFO, who is also in charge of compliance ,about the very issue, but he said that there really is nothing he can do… I asked the CFO to keep our conversation, confidential… In any case, is there a way for employer to check an employee’s brokerage statement without permission? Or does this analyst basically have free reign? Thanks.
Not really, but his broker needs to check to make sure he doesn’t work for a company with reporting requirements. I agree that this is a serious problem and the CFO should take it more seriously. The firm can get in a lot of trouble if someone finds out that the guy who says he is not trading stocks is front-running or trading on insider info. Very dumb.
What a scum bucket! You should definitely persist on this issue. Was the stock he was investing in one that your company has looked at?
there are two rules to the game: keep your mouth shut and never rat on your friends. you do that, you will be ok.
Screw that, this guy is being dishonest and could potentially get the company into a huge amount of trouble. Besides, why should he be allowed to get ahead through lies while taking advantage of other people?
He is simply stealing money from all the rest of us. KICK HIS ASS. PUT HIM IN JAIL WITH MARTHA.
break his leg!!
key his car
You did the correct thing by telling the CFO/CCO so you’ve at least somewhat covered yourself in case this surfaces. It’s tricky because when he was drinking he told you he invested in XYZ and now he swears he didn’t. My firm has a policy whereby when you’re first hired you present an inventory of all assets and accounts in which you’re authorized to trade. After that you can choose not to provide statements if you’re not investing but every month you have to signoff that you have had no personal transactions.
We have employee agreements in place similar to those that BOMC just mentioned… our compliance policy is adequate… the only issue for me is the question of enforcement. This guy is clearly hiding something … it sounds like there is no means for my CFO to investigate further, since its essentially his words against mine. It seems like the perfect white collar crime. And it’s simply WRONG.
FrankArabia Wrote: ------------------------------------------------------- > there are two rules to the game: keep your mouth > shut and never rat on your friends. you do that, > you will be ok. What Frank is trying to say here is, “Feel free to let this guy ethically compromise your firm”. This isn’t a game, Frank, this guy is stealing from clients.
It’s not exactly clear this guy is up to no good. He might just think in a misguided way that it’s none of anyone else’s business what he does with his investments. In the end, it’s wildly easy to do this kind of thing (e.g., organize some company in the Caymans and do your trades through them)
There was a lowly analyst working on the TXU merger who merely phoned a relative in the middle east (maybe it was the far east) and it got traced back to him. I think he’s in jail now. damn patriot act is making hard to make a buck.
Get him drunk again to get more info. But make sure to use his credit card when the bill comes. The right roofies are just as effective as well.
You’ve told your superior. It’s not your issue anymore. Go about your business.
According to the CFA code of ethics, you report concerns to a supervisor and dissociate from any activity that smells unethical (i.e. your colleague). Probably a good idea anyway, since this guy seems to lie. If you are a supervisor, you need to open some sort of process to investigate or have the guy sign such a statement that he/she is not trading. Now… more importantly, are hedge funds ever acceptable for a private client with moderate but not high risk tolerance?
OP has covered himself ethically,but I dont think he can leave it at that.If the truth of this matter were to become public,it would presumably have a significant impact on his future,given the small size of the firm.
bchadwick Wrote: ------------------------------------------------------- > > Now… more importantly, are hedge funds ever > acceptable for a private client with moderate but > not high risk tolerance? The answer is no, but it’s not about the underlying investments - it’s about the fee structure. The standard fee from a hedge fund is 2/20 so if you return 8% before fees the client gets about a money market return which just shouldn’t excite anyone because along with fees the client gets low visibility of assets, fraud risk from unregulated and unsupervised investing, manager mark risk, liquidity problems with underlying investments, tax complications, inability to control taxable gains and losses, lock-ups, gates, sophisticated investor rules, etc… To overcome those, you pretty much need to be investing in a way that is expected to return better than equity returns, hopefully in some way that is not especially correlated with equities (since you can get that risk simply and easily with few of the problems above). That means you need to be investing in a way that is expected to return at least 15%/annum in an uncorrelated way to equities. Markets are plenty efficient that there just aren’t investing strategies expected to return 15%/year in a way uncorrelated with equities that are not “high-risk” strategies.
dunkamania Wrote: ------------------------------------------------------- > OP has covered himself ethically,but I dont think > he can leave it at that.If the truth of this > matter were to become public,it would presumably > have a significant impact on his future,given the > small size of the firm. He has to leave it at that. It’s not his job anymore once he has alerted his compliance officer unless he feels that this conduct is so ethically inappropriate that he can’t work for the firm anymore.
I concur with Joey. Besides, what’s the basis for an investigation? “Well, ya know, he was drunk one time at a bar…”