Conflict of interest?

Discussion in 'Prop Firms' started by codetroll, Jan 5, 2009.

  1. Just got a question for any prop. firm/trader out there.

    Is there a conflict of interest or any kind of laws that would restrict let's say a financial adviser (edward jones, Merrill, etc.) from trading as a prop. trader?

    I don't prop. trade so I don't know the limitations/laws in regards to this matter.

    I know insider trading, at any level, is considered illegal in the U.S., but other than that?


  2. DaveN


    Certainly there will be some regulatory issues. Presumably both firms will require a Series 7 in addition to others like a 63,66,55 etc. That individual would have to be registered with two different Broker Dealers. That's generally the show-stopper, and I believe not normally allowed.

    Even opening retail accounts can be difficult when you are registered with a Broker Deal (BD). Your compliance department receives and probably monitors your activity in each account. So there's additional workload and administration involved.

    Even if the Prop firm somehow doesn't manage to require a Series 7 registration, the exisitng BD requires full disclosure of any outside activities. In fact, in most cases, preapproval of those activities is required. This would be the case here, and I doubt that approval would be granted.

    Finally, there's just the conflict of interest issue. The existing BD wants that registered rep. to be generating business for them, not profits and commissions for some other business. Not only doesn't it make business sense for them, but also, because of the regulatory and oversight requirements, it creates more work for them. So, it's a bit harder generally.
  3. one of the reasons getting a 7 "just to trade" is'nt a good idea; at least thats what i have been told.
  4. Retail accounts are not a problem. The other "side" of the industry jobs (issues)vary from Firm to Firm. When one decides to trade for a living, they can have other ventures, as long as they are disclosed properly to Compliance. If there are issues, they can be dealt with at that point.

    All the best,