Comments on: Sell-side research isn’t inside information http://blogs.reuters.com/felix-salmon/2012/05/20/sell-side-research-isnt-inside-information/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Metsox http://blogs.reuters.com/felix-salmon/2012/05/20/sell-side-research-isnt-inside-information/comment-page-1/#comment-39476 Fri, 25 May 2012 05:19:01 +0000 http://blogs.reuters.com/felix-salmon/?p=14229#comment-39476 Felix – I love your posts but you are completely wrong here. It is illegal to front run your clients in the fashion described here. Whether it happened or not, or whether it should be illegal or not are different questions.

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By: niveditas http://blogs.reuters.com/felix-salmon/2012/05/20/sell-side-research-isnt-inside-information/comment-page-1/#comment-39362 Wed, 23 May 2012 02:15:29 +0000 http://blogs.reuters.com/felix-salmon/?p=14229#comment-39362 nharish, if you thought it was worth buying only at 34 and not at 36, why did you agree to buy it at 36?

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By: nharish http://blogs.reuters.com/felix-salmon/2012/05/20/sell-side-research-isnt-inside-information/comment-page-1/#comment-39329 Tue, 22 May 2012 02:10:12 +0000 http://blogs.reuters.com/felix-salmon/?p=14229#comment-39329 I’ve always been interested in understanding this. So I believe the point here is not about Insider trading, but rather unethical practices that fundamentally provide a certain advantage to the firm (even a few minutes is sufficient because they have direct access to a block of stocks and based on volumes even a few cents might be enough to make a profit).

Now my other question is, how is Salmon Barney’s conduct appropriate here. They made a concerted effort to sustain the price at 38. Failing that, the stock would have fallen to 34 on Friday. I would have bought the stock at 34 instead of the 36 I ended up paying at Market-open. Isn’t that inappropriate as well?

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By: JJStokes http://blogs.reuters.com/felix-salmon/2012/05/20/sell-side-research-isnt-inside-information/comment-page-1/#comment-39291 Mon, 21 May 2012 19:56:42 +0000 http://blogs.reuters.com/felix-salmon/?p=14229#comment-39291 Mr. Salmon contends that, in the case of legitimate, independent research, “once that analysis has been done, the analyst can do what she likes with her analysis. She can trade the stock, she can write it up, she can talk to hedge funds about what she thinks, she can sell it to clients, she can make it public. Or, she can do all of the above, in any order she likes.” Not exactly, at least not if you are a CFA Charterholder abiding by the principles of the CFA Institute Code of Ethics and Standards of Ethical Conduct. You can’t front-run your clients and you can’t selectively disclose recommendations. Clients must be treated fairly, meaning that investment recommendations are disseminated in such a manner that all clients have a fair opportunity to act on every recommendation. So while insider trading is the wrong label, when it comes to following self-serving, profit-seeking motives over duty to clients, the conduct is just as egregious.

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By: MrRFox http://blogs.reuters.com/felix-salmon/2012/05/20/sell-side-research-isnt-inside-information/comment-page-1/#comment-39275 Mon, 21 May 2012 15:08:51 +0000 http://blogs.reuters.com/felix-salmon/?p=14229#comment-39275 It can legal or illegal – whatever we as a society want it to be. This not a Constitutional issue. The past cases make it clear that there’s something that feels wrong about this, and it’s punished if there a legal peg to hang it on in a particular case – but it doesn’t fit any explicit definition of an ethical violation in every case.

What is wrong in every case though, IMO – to release such reports and not disclose that the publisher and/or certain others may hold positions in the subject issues, and not disclose that the contents of the report have been made known to others ahead of general release.

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By: TinyTim1 http://blogs.reuters.com/felix-salmon/2012/05/20/sell-side-research-isnt-inside-information/comment-page-1/#comment-39274 Mon, 21 May 2012 15:03:50 +0000 http://blogs.reuters.com/felix-salmon/?p=14229#comment-39274 Marko, from Felix above:
“The SEC does consider the news that an investment bank is going to change its rating on a stock to be material nonpublic information.”

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By: marko12345 http://blogs.reuters.com/felix-salmon/2012/05/20/sell-side-research-isnt-inside-information/comment-page-1/#comment-39268 Mon, 21 May 2012 13:29:34 +0000 http://blogs.reuters.com/felix-salmon/?p=14229#comment-39268 It’s not illegal what they were doing. An analysis is not material nonpublic information. However not distributing that research action evenly and at the same time to clients is highly unethical.

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By: TinyTim1 http://blogs.reuters.com/felix-salmon/2012/05/20/sell-side-research-isnt-inside-information/comment-page-1/#comment-39263 Mon, 21 May 2012 10:52:33 +0000 http://blogs.reuters.com/felix-salmon/?p=14229#comment-39263 Isn’t it clear market manipulation?
The upgrade event is material and its timing non-public.

Whale-like clients receiving that info ahead of time, means non only are non-Goldman clients at a disadvantage but even Goldman clients are at a disadvantage (presumably the “muppets”).

A great way to maximise your commissions would be to let clients know there was a VIP club getting upgrade info early.

Or just front run it through the prop desk.

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By: JimNavadomskis http://blogs.reuters.com/felix-salmon/2012/05/20/sell-side-research-isnt-inside-information/comment-page-1/#comment-39261 Mon, 21 May 2012 05:48:59 +0000 http://blogs.reuters.com/felix-salmon/?p=14229#comment-39261 Oops hit submit too soon – Clearly there were at least “individuals” at Lehman that could have been prosecuted.

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By: JimNavadomskis http://blogs.reuters.com/felix-salmon/2012/05/20/sell-side-research-isnt-inside-information/comment-page-1/#comment-39260 Mon, 21 May 2012 05:45:43 +0000 http://blogs.reuters.com/felix-salmon/?p=14229#comment-39260 From your article:
In other words, as far as I can tell, no one has ever been successfully prosecuted for the crime that Morgenson and Parmigiani are so upset about here — the crime of giving information about ratings actions to some clients before other clients

From the Times’ article:
But while insider trading commonly involves nonpublic corporate information, advance warning on research changes can also yield quick, illicit gains. The S.E.C. said as much in a rare research case it filed in 2007 involving an executive at the Swiss banking giant UBS. In that case, eight individuals and three hedge funds were charged with profiting on tips about coming analyst ratings changes — “valuable and material, nonpublic information,” the S.E.C. said. One executive went to jail, and others settled with the S.E.C.

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