Ethics Test - Sharing Secret Documents

What would you do if you got your hands on confidential documents that could greatly benefit your firm? What do you think your firm would do if they found out? A recent piece in Bloomberg discusses a similar situation at Goldman Sachs:

Goldman Sachs Group Inc. (GS) dismissed two bankers after one of them allegedly brought secret documents from the Federal Reserve Bank of New York into the firm.

A junior banker, who had joined the company in July from the New York Fed, was fired a week after the discovery in late September along with another employee who failed to escalate the issue, according to an internal memo obtained by Bloomberg News that didn’t identify the pair. Jake Siewert, a bank spokesman, confirmed the contents of the memo, which was prompted by a report yesterday in the New York Times.

“We have zero tolerance for improper handling of confidential information,” Goldman Sachs said in the memo. “We are reviewing our policies regarding any hiring from governmental institutions to ensure that they are appropriately effective and robust.”

Certainly we are all incredibly ethical people who definitely know right from wrong, but assuming any set of circumstances, how would you handle it?

 

I can't imagine how bringing these documents in would do anything but put yourself and everyone around you in harm's way. What's the upside to bringing them in secretly? To hope your team is okay with it and subsequently acts upon it illegally to profit a bit, increase their bonus slightly, and hope they aren't caught and tarnished for life? This is especially stupid as a junior banker. The easy decision is to just tell compliance and ask them what to do.

 

“We are reviewing our policies regarding any hiring from governmental institutions to ensure that they are appropriately effective and robust.”

This is hilarious considering GS is a revolving door at the higher levels for government employees. You think they'll retroactively apply this to Hank Paulson bailing his old firm out and letting Lehman die?

 
Dingdong08:

“We are reviewing our policies regarding any hiring from governmental institutions to ensure that they are appropriately effective and robust.”

This is hilarious considering GS is a revolving door at the higher levels for government employees. You think they'll retroactively apply this to Hank Paulson bailing his old firm out and letting Lehman die?

This haha. Can we get a statement from @"DickFuld" ?
I'm too drunk to taste this chicken -Late great Col. Sanders
 
Best Response
Winning Since 1776:
Dingdong08:

“We are reviewing our policies regarding any hiring from governmental institutions to ensure that they are appropriately effective and robust.”

This is hilarious considering GS is a revolving door at the higher levels for government employees. You think they'll retroactively apply this to Hank Paulson bailing his old firm out and letting Lehman die?

This haha. Can we get a statement from @DickFuld ?

@"Dingdong08" this is pretty much exactly what I've been saying all along. it's a major problem when you have government officials who have significant financial and let's call it 'emotional attachment based' incentives (incentives to help your friends and former colleagues) sitting in positions to influence outcomes that differentiate between their friends (GS) and their foes (LEH). If they had Paulson sitting as the Secretary of Agriculture, it would have been far less of an issue because there wasn't a whale of a conflict of interest for him in that seat compared to the seat he was in.
 
Dingdong08:

“We are reviewing our policies regarding any hiring from governmental institutions to ensure that they are appropriately effective and robust.”

This is hilarious considering GS is a revolving door at the higher levels for government employees. You think they'll retroactively apply this to Hank Paulson bailing his old firm out and letting Lehman die?

"But we will continue to hire and rehire SEC attorneys for our legal divisions to ensure that we have zero issues with unexpected investigations."
"Decide what to be and go be it." - The Avett Brothers
 

They're throwing some low level grunts against the wall to make an example out of them and also for the sake of good press. Also, I suspect that there's more to the story, most likely along the lines of what Marcus pointed out; they were trying to use them to peddle influence. All fine and well and lots of people do it (I myself do not), but this is the kind of thing you don't do if you can't avoid getting caught....and don't bring such things into the office, ever.

Get busy living
 

I love how everyone on here is assuming that this Fed hired into Goldman was a trader in some kind of front office capacity... Why the heck would GS hire someone from the Fed to the front office and then put that inexperienced person into a seat where they have no actual capabilities for Trading or moving markets.. it's simple, you don't. They are quoted as being "bankers" because they worked at a bank, but that doesn't mean they were in any seat to move markets right? Need more color around this so we can actually evaluate the actions GS took and what the heck this fired ex-Fed kid was thinking..

.
 

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I'm not a lawyer or a specialist on the definition of insider trading, but something about this smells fishy to me. This is a firm with 2 main products. One product is an economic analysis of varying countries and economic sectors. Fair enough, they have a great deal of experience in analyzing and predicting trends on these topics. The other service is an "insiders view" into the thinking, thought process, and content of future statements to be made public, by government officials, ranging from FED and ECB central bankers to Treasury officials and other government employees. This "other service" is the real service. Hedge funds and investment banks pay big money (hundreds of thousands of dollars) for this inside information. I'm just wondering, what makes this "inside information" different from "SEC classified inside information" about a company before it too is made public knowledge.

Statements by public government officials regarding economic policy are classified as "material non-public information" before they are made public. For this reason, wouldn't prior knowledge of these statements not only preclude persons from trading on the information, but also preclude persons from disseminating the information to others? Wouldn't the government officials who "leak" this "material non-public information" be accountable to some legal ramifications for their actions? Would selling this information to 3rd parties who then trade on this information be considered "insider trading?" I don't know the legal answers to these questions but the question is worth asking.

 

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