the show NY Wrote: ------------------------------------------------------- > bannisja Wrote: > -------------------------------------------------- > ----- > > ^ that was a different q, right? that was > maybe > > the 1st q? i put that answer i think. > > > > also put prop risk arb. > > > the prop risk arb wasa diff q. what did ppl put > for that? it was the last Q in ethics AM i think. > after a firm goes on watch list compliance dept > does some things and Q says what sohuld they > suspend > > A) dont remember > B) risk arb > C) personal trading i put personal trading.
yes - suspend personal trading. no violation by going against his boss request and investigating further and password protection is a violation.
I said violation to employer since the managers were not doing anything illegal. Your duty as a supervisor is to do investigations where the integrity of the capital markets is at stake, illegal activity took place, or its against your company’s policy. In this regard, the mangers were not doing anything illegal. The integrity of the market was safe and his employer said as long as they are doing their thing and its not required to do anything then let it be.
stock was already on a watch list. proprietary risk arb is an active stance in the market- potentially betting against your IPO or whatever they were doing- when you do an IPO/secondary, recommended is to take a passive stance. i think prop risk arb was the bigger offense here over personal trading. anyone else thoughts on that one?
risk arb FOR SURE 
In such instances, a withdrawal by the firm from market-making acts would be a clear tip to outsiders. However, firms that continue market-making activity while in the possession of material nonpublic information should instruct their market makers to remain passive to the market—that is, take only the contra side of unsolicited customer trades. In risk-arbitrage trading, the case for a trading prohibition is more compelling. In contrast to market making, the impetus for arbitrage trading is neither passive nor reactive and the potential for illegal profits is greater. The most prudent course for firms is to suspend arbitrage activity when a security is placed on the watch list. Those firms that do continue arbitrage activity face a high hurdle in proving the adequacy of their internal procedures and must demonstrate stringent review and documentation of firm trades.
I think prop risk arb is more like a trading strategy in the trading floor and trade based on the charts rather than involving investment banking activity and research department, isn’t it? rather than trying to gain from the material nonpublic information. actually it was one of the questions I don’t feel very confident, went with personal trading…
pg 41 “in risk-arb trading, the case for a trading prohibition is more compelling. in contrast to mkt making, the impetus for arbitrage trading is neither passive nor reactive and the potential for illegal profits is greater. the most prudent course for firms is to suspend arbitrage activity when a security is placed on a watch list” security was 100% placed on the watch list. my answer stands boys.
well, two well respected AFers confirm the answer, seems I gave another one back to CFAI
i am going to eek out a pass on ethics. this is my new theory on my test. i bombed econ/PM/quant but i think me reading ethics like 4000x was a good idea.
bannisja Wrote: ------------------------------------------------------- > stock was already on a watch list. proprietary > risk arb is an active stance in the market- > potentially betting against your IPO or whatever > they were doing- when you do an IPO/secondary, > recommended is to take a passive stance. i think > prop risk arb was the bigger offense here over > personal trading. > > anyone else thoughts on that one? wasn’t the question IN ADDITION to the actions already taken? The firm already put restrictions on personal trading and risk arb i thought? I put market making b/c of the existing i banking relationship and since they already put restrictions on personal trading and risk arb…could be wrong though…who knows