Trading as a Research Analyst

Discussion in 'Professional Trading' started by EddyD, Oct 18, 2006.

  1. EddyD


    Hey guys, first time poster, long time reader. I have a bit of a regulatory question, and I'm not sure if this is the right forum, but I'll ask anyway. I'm thinking about accepting a position as a junior buy-side equity analyst and was wondering if anybody knows about some of the rules regarding the trading of my account (I have an Ameritrade acount).

    I'm pretty green to the industry and haven't asked anybody at work because I haven't started yet. But say I'm researching a stock, and I think it looks really attractive and would like to buy it for my own account. Can I buy it, even if my boss recommends the stock for our firm's portfolio? I mean, I don't know if our orders would move the market at all or not, and I'm trading with a long-term horizon, so I wouldn't be trading in-and-out of positions really rapidly, this a big deal at all?
  2. Drew07


    I was having a conversation with my girlfriend's sister's boyfriend who works for JPM in New York. He was telling me that every time he wanted to make a transaction he had to type up what he wanted to do and first have it approved by someone in the department (not sure who) before he did anything. I dont know if this is an industry wide requirement but there's a good chance you will have to have similar disclosure and approval. I can't imagine there being any problem with having a long term position. Hope this helps some....I'm sure someo will post later that knows the answer exactly.
  3. what your boss recommends for your firm and what you trade are totally independent and there is no problem with that.

    your job will be advising your boss anyways and you can buy whatever stocks etc. on your own account regardless of ur funds portfolios.

    if you like to go on the street and scream about it and tatoo it on ur forehead, some brokers might like to register you as a proffesional, in which case you are likely to face slightly higher acount fees, depending on ur activity.

    in short, there is absolutely nothing wrong with what you've described.

    one thing: if your fund is listed, (trading on an exchange) and ur boss tells you how bad ur portfolio managers did today, a day before u reconsoliate ur returns with clients - and u go home shorting ur fund, you'll be in serious trouble if it is spotted and traced.

    however, the advisory from ur boss, or urself etc. on external securities is perfectly fine. nothing wrong with that at all. there are many analysts who trade on their own accounts.
  4. For the sell-side your trades would have to be approved and indeed you would probably be barred from trading in the stocks you covered as an analyst. For the buy side, it's not as cut and dried, but I would imagine that front-running - taking a position based on non-public information such as your firm building or liquidating a position - could get you into a lot of trouble very quickly just as it would on the sell-side. The larger the firm, the more attention they will pay to the issue and they more likely they are to impose restrictions (such as a minimum holding period of, say, 3 months). Moreover, even if the firm you are considering is fairly laid-back about it now, it could become stricter in the future. So, my advice would be that if you want to be an analyst, be prepared to lose a lot of flexibility in your personal trading.

  5. mbay


    Depends what companies you work for, lol, but most of bigger companies have restrictions on what you can trade and require you to setup an account with them.

    Smaller companies also have restrictions on what you can trade but you could setup an account with a third party. You just need to sign some papers.

    Obviously, you want to avoid conflicts of interest if you plan to stay with the company.
  6. Your employer's compliance policies will likely be made clear to you as part of the hiring process.

    Everyone in the business manages a PA - personal account. Typically you must notify a compliance officer in advance of any transactions. Some employers even prohibit any trades with holding periods less than X-number of days. This goes for account both in your name and those of immediate family members and parents.

    Certain employers may also 'black-list' or 'grey-list' certain stocks that are actively being accumulated, sold, marketed, courted etc., in one form or another.

    Finally, you should assume your trading activity will be subject to unfettered gossip and scrutiny among anyone at your firm that has an interest. If you are an active trader, your activity is also ready grist in the hands of internal enemies.

    Not really conducive to anything but swing trading, in my view, again depending on the employer.