Why even bother disclosing PA if you can confirm your employer won't ever find out?

Why even bother disclosing your PA to your HF/asset management employer if you are confident they can't find out? 

The PA rule seems to be a lot of inconvenience for analysts/employees of a firm but strangely, there's nothing to enforce the non-PA rule for founders of the firms themselves. 

We live in a world where these rules seem to be put in place to keep regular/poor folks (employees) in their place while the rich and those in power have no such ethical regulations at all. 

CEOs, politicians, Congressmen, Supreme Court justices, even Buffett all trade their PA without limitations, and freely trade in inside information on the stock market to make millions while amassing even more power. They cut corners and avoid paying taxes. 

Yet ordinary people who just try to make a living working at a firm/bank/fund have to disclose their trades out of "ethical" considerations? So what if you trade a couple hundred K of a stock? How is this trading volume going to impact any asset management firm at all? 

Fuck these rules. I say don't disclose your PA to your employer if you are confident you won't get caught. There is nothing wrong with making a few extra bucks for yourself when the economy sucks. This limitation on PA trading is just another way for employers to fuck their employees and to keep them at their mercy. 

 

Well, I can understand your frustration, but let's take a step back and look at the bigger picture. The rules around Personal Account (PA) trading are there for a reason. They're designed to prevent conflicts of interest and to ensure that everyone is playing by the same rules.

1.) Transparency: Disclosing your PA trades to your employer ensures transparency. It's about making sure that you're not using your position or access to information to gain an unfair advantage in the market.

2.) Trust: It's also about trust. If you're working in finance, especially in roles like asset management or hedge funds, you're dealing with other people's money. Your clients need to trust that you're acting in their best interests, not just your own.

3.) Legal implications: There can be serious legal implications for not disclosing your PA trades. If you're caught, you could face penalties, lose your job, or even face legal action.

4.) Ethical considerations: Lastly, it's about ethics. Yes, there are people out there who bend or break the rules, but that doesn't make it right. If you're in this industry, you should strive to uphold the highest standards of integrity and professionalism.

So, while it might seem like an inconvenience, these rules are there to protect everyone involved. It's not about keeping people in their place, it's about ensuring a fair and transparent market. And remember, as the saying goes, "Just because you can, doesn't mean you should."

Sources: Personal Account Trading Restrictions at MBB, My Story: From Trading Floor at UBS To Entrepreneur on Kickstarter, Q&A: ex-bank trader now running crypto hedge fund. questions?, (Physical trading) What is considered an 'acceptable' story for why trading?

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

How is making a few extra bucks worth risking your career when your HF career’s EV is like at least an order of magnitude larger? How are you working in HF if your risk reward calculation is so bad…..

 

"your HF career’s EV is like at least an order of magnitude larger" 

I wouldn't be so sure about that. Those are the rare lucky ones. You're talking like EVERY single person in finance is guaranteed 30-50 million. That's patently false. Not every person in the HF industry makes seven figures/8 figures by the time they are 35. For most people, being able to trade a good PA while also working could seriously compound wealth and make them less dependent on a potentially greedy HF boss who might screw them during bonus season. 

My point is being able to trade a PA actively while at the same time working at the HF, is by no means an actual clash of interests. If America's most powerful lawmakers and judges are insider trading and taking bribes, why can't an analyst at the HF? Why are rich people allowed to break rules but normal people have to abide by them? It's fucken sick and unfair. 

I agree, there is a price that a HF can pay me so I am not incentivized to do my PA. If they pay me at least 300K base and a mega million bonus, yeah of course I wouldn't do my PA. But a lot of small hedge funds pay people 80-100K a year with a greedy boss who screws people during bonus time. Why should someone in this case NOT do their own PA? 

HFs don't want you to trade your PA because they want you to be their bitch and have to suck up to the PM because your job stability depends on his mood. He can fuck you at the end of the year with no bonuses and if you don't have an independently solid PA, you're at his mercy. Why is that good? I want a 8-9 figure PA that compounds wealth independently so I can say "fuck you" to my HF boss anytime and not be at his mercy. That's true power and true freedom.

Not all HF bosses pay people properly. Many people get fucked. HFs/pods constantly lay people off without warning. No company ever cares about its employees. Why should employees have to sacrifice so much for the company? If you want me to give everything up for the company, pay me 10-20 million annually. Other fuck off. I'm doing my own PA without disclosure and if necessary I will use a family member to open the account. Having a good PA profit is good hedge against this type of employer abuse and unpredictability. 

 

If you're good enough to have alpha trading in your PA to the levels of magnitude where it would be worth your time vs. grinding it out making 300-500k in finance, you're probably good enough to make a lot more money being a good hedge fund P&L generator. Hence it's pretty dumb to risk your career for some PA trading.

 

No, but the problem is many HFs require you to hold for at least 30 days - basically it means you can't trade. Also, these HFs underpay analysts and may screw you at the of the year on bonuses if the PM/founder is a greedy SOB. So what incentive is there to "follow the rules" and "play fairly" when almost all people at the top cheat and don't play fair? The older I get, the more I realize almost all those people in power, whether finance, politics, business, etc... basically cheat and skirt the rules. Congress people inside trade the fuck out of the US markets, Supreme Court justices are actively and openly taking bribes by billionaires, corporations screw the American people by paying off politicians using lobbyists, that's just in the US. Every other country the corruption is like 10x worse. All I see are the people who are rich and in power cheating, using loopholes, etc..., so why should HF analysts at some small fund that underpays people abide by these stupid rules? If you know the fund has a very small chance of discovering your PA, what is the actual argument in favour of disclosing? Why can't you make a few extra bucks? How does that conflict at all with the fund's mandates? If Congressmen in Washington can day trade the fuck out of insider information, why should others be allowed to do the same thing? It's infuriating the more you think about it. Nearly all those in power cheat and don't play by the rules. Laws are made by rich people to keep normal people in their place. 

 
holdencrystal12345678

No, but the problem is many HFs require you to hold for at least 30 days - basically it means you can't trade. Also, these HFs underpay analysts and may screw you at the of the year on bonuses if the PM/founder is a greedy SOB. So what incentive is there to "follow the rules" and "play fairly" when almost all people at the top cheat and don't play fair? The older I get, the more I realize almost all those people in power, whether finance, politics, business, etc... basically cheat and skirt the rules. Congress people inside trade the fuck out of the US markets, Supreme Court justices are actively and openly taking bribes by billionaires, corporations screw the American people by paying off politicians using lobbyists, that's just in the US. Every other country the corruption is like 10x worse. All I see are the people who are rich and in power cheating, using loopholes, etc..., so why should HF analysts at some small fund that underpays people abide by these stupid rules? If you know the fund has a very small chance of discovering your PA, what is the actual argument in favour of disclosing? Why can't you make a few extra bucks? How does that conflict at all with the fund's mandates? If Congressmen in Washington can day trade the fuck out of insider information, why should others be allowed to do the same thing? It's infuriating the more you think about it. Nearly all those in power cheat and don't play by the rules. Laws are made by rich people to keep normal people in their place. 

Yes, that is what’s holding you back in this world, the ability to trade your PA. With that you’d be making $10mm a year but those stupid, cheap HFs aren’t letting you with your crappy base and then ghosting you on your bonus. You are so good at trading? Then go trade your own account. If that’s not enough money to make a dent, then maybe you shouldn’t risk your career over the few bucks. 

 

Brother, I totally agree with you that rules / regulations in this life seem to only apply for regular folks and is hypocritical end to end. But defying these doesn't make you a guerilla fighting for a fair and just world. The downside here is all yours and its gonna be super ugly. Those who do have the means to cover their basis and are able to stay afloat. Think smart and stay in your lane

 
Most Helpful

Have you ever opened a brokerage account? You have to disclose your employer. That’s how you get caught. If you don’t disclose your employer and you are trading any real amount of money, your activity is going to be flagged. There have been so many cases of people doing insider trades that involved a net gain of under a couple hundred thousand dollars. That’s absolutely not worth ruining your career over. But even if it’s life changing money like a $1M+, do you continue to live in the US just hoping that you won’t get caught? Sounds stressful as hell to me.

I do agree that the rules are not applied fairly but not to as big of a group that you’ve listed. Plenty of high level execs, including CEO’s, have been prosecuted for insider trading. It’s the politicians who don’t get in trouble.

 

Most people don't have "careers" at all that pay at least 3-5 million bucks a year. Only the lucky ones do. There isn't much to lose. You talk as if every person in finance who "works hard" gets a guaranteed seat to make 3-5 million a year and a vibrant bull market. Total horseshit. 

 

Fwiw, I agree with the principal of it....these rules are very much designed to -- if not by intent then by effect -- keep the bottom 80% poor / making just enough to keep them slaving away.

However, like it or not, they are the rules which means if you get caught breaking them then you are screwed. At my firm, even frickin Microsoft (largest company by mkt cap at nearly $3 trillion) is put on the blocked list and you can't trade it if one portfolio is thinking of nicking 25bps. Which is the most idiotic thing ever since with these mega caps, we literally could not move the price meaningfully even if we wanted to (i.e. add 10% of the firm in that name). It's all done in the name of hyper-compliance but really just screws of over the employees. SEC rules don't mandate this as even large managers like JPM allow much more free trading, but many firms over-correct to be safe while hurting the bottom 80-90% of folks. But they don't even think of it -- if I'm a top 10 person at a $80bl boutique manager and I'm clearing $5-15ml a year incl partnership fees, I have no need to trade in my PA...they don't even think what this would mean for anyone who are not them. It's ludicrious

I sympathize with you but given more compliance and more digitization and more ways of tracking people, the likelihood of getting caught increases every single year. Just not worth it. If you really, really care about it then move to a firm where they have more liberal trading policies. 

 

Principles aside, the issue is, the people that you're claiming you're fighting for, are *exactly* those that can't afford the risk. You're advocating for those who are working in small HFs, very unlikely for them to see a 7-8 figures payday. By definition these people are not the cream of the crop, and therefore dispensable. On top of that these people most probably do not have that much savings to trade to make it worth the risk. A bit bizarre to suggest a 28y old HF analyst in a small fund should sling 50-60k in their PA to make an extra 5k a year while risking their whole career.

 

What "career" are you referring to? Your definition of "career" is pretty much the top 1% most lucky people in the world who get those rare seats at big funds clipping multi-millions a year. Everyone else, no matter how talented, if they are not lucky, do not get this privilege. And these people shouldn't trade their own PA to build their own nest egg and increase their financial security? What the fuck planet are you from? Not everyone has careers, even those who work super hard. You need luck. Maybe you need to look in the mirror and check your sense of privilege. 

 

Unless you're one of the few people lucky enough to land at a good HF seat, you need a few side hustles to break out of the hamster wheel. 80-100k base and screwed on bonus is BS for working HF hours/stress. Better off going to a dumb corporate job and yoloing the PA.

I don't get why people glorify the HF industry and career and let themselves get taken advantage of. It's a business and job like any other. If you can't get that bag here, figure out where the bag is and go there. "But muh intellectual stimulation" - no, your job is to figure out how to play the game to make money.

When Buffett started out, investing was the easy game. It's no longer the case. Those who have hustle will figure out the new easy game if it exists. Good luck sir.

 

As someone who worked closely with the higher echelon folks at my previous company, HR does more than simply screen resumes and hire people.  Everyone discloses their PA with application and there are people who does DD on behalf of the company.  

 

Then don’t work at a HF. Go work in IB or a corporate job so you don’t get screwed at year end. 

 

Just work in a different industry while trading on your own. I agree that these rules are really annoying and designed to keep employees in their place more than protecting clients. Some of the big prop funds have no clients or PA restrictions. There are strategies that work well on a PA but don't scale or make sense for a large fund.

 
cp5670

Just work in a different industry while trading on your own. I agree that these rules are really annoying and designed to keep employees in their place more than protecting clients. Some of the big prop funds have no clients or PA restrictions. There are strategies that work well on a PA but don't scale or make sense for a large fund.

I don’t understand all this “keep employees in their place” nonsense. It’s not like these people could make millions day trading but instead are being held back by the firm. Most people can’t beat an index, and you can invest in an index (or buy and hold equities). It’s not to keep anyone in their place, it’s to cover their ass and not have to deal with annoying regulations and questions. Nobody is thinking of this as a way to make sure these “poor HF employees” suffer. 

 

Funniest thing about this post is the guy's full confidence he's going to kill it "actively trading my PA" (i.e. pissing away 50% of any profit in short-term cap gains taxes).

He is skeptical he will ever make it big as an HF employee, but he will become a billionaire off his $100k PA if left unleashed.

 

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