Joined a mutual fund company and now there are many restrictions in place to trade. Is this normal? How to cope with it?
Long story short, I was working at a commercial bank under retail banking, dealing with mortgage underwriting. There were no stock trading restrictions placed whatsoever. We got the rudimentary "insider trading" warnings, and couldn't trade our company stock for a certain period before earnings.
I begun buying stocks when I was working at this bank. I practice long-only strategy, and thus far I have only ever bought stocks, never sold them. I also only traded small amounts as I was getting started but am now much more confident in myself and was planning to move on to larger amounts.
Due to this interest in stocks and mutual funds (I invested in those too as a macro strategy), I applied for a job at a mutual fund company. Heck, in my interview I used it as a selling point.
However, I was NEVER once told about the restrictive trading policies! I quit my previous job, and day one I get the compliance briefing. Is it even legal?
Anyway I'm kinda distraught. Some of the rules:
Need to open a brokerage account with the mutual fund's sister company (investment bank). Higher minimum fees (basically 50% jump), 300% jump in the rate beyond that.
Cannot buy a stock 5 days before/after the fund has sold/bought a position in those stocks
Need to get approval before any trade. Both for stocks and mutual funds.
Can't short sell or contra trade (doesn't affect me though as I don't plan to do either)
Is this normal for mutual funds to not disclose this in their offer letter? Are the above rules normal for the industry? Should I be worried someone is looking over my trades? Will they ask me questions? To what extent should I comply? (I have zero interest in benefiting from any kind of insider info, not that I will get any). Will they be suspicious of my rather frequent switching of mutual funds as a part of my macro strategy?
PS: I DO NOT trade/research on stocks or macros during office hours. Never have and never will. I also don't bother with daily stock fluctuations.
I interned for a mutual fund company with similar rules. Chances are they were involved in a legal battle with insider trading at some point so now they are overkill with compliance rules. At least thats what I encountered at my company.
"Is it even legal?"
Without a doubt, it is 100% legal. It's pretty normal for this not to be disclosed in the offer letter as it's considered "common sense" and is common practice for financial institutions. I can almost assure you that someone is looking over your trades and you should definitely call up compliance before making any trades. The whole checking in with compliance and monitoring employees trades has to do with insider trading in that as an employee of the MF, you may be exposed to information that can be considered insider information without you being consciously aware that the information shouldn't be traded upon. All of these rules are in place for your benefit, rest assured.
Just watch the stock your mutual fund is trading. It is the norm at any financial firm, especially banks and mutual funds to have to disclose your accounts and pre-clear every trade.
There will be restrictions on different stocks at different time due to MNPI, but generally you can get away with finding stocks / and industries that aren't effected. Also these companies usually have relatively lenient policies on MF trading and ETF's as they are baskets of stocks.
Source: I work at a bank and trade almost every day and have no issue with it
Ok but will Compliance get suspicious if I conduct trades on a weekly basis?
What if I have to react imminently to materially bad news for the long term? How would hat work out?
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