(Insider) Trading after leaving IBD
tl;dr: Left IB a couple months ago, how long do you need to wait to invest through your personal portfolio in clients you worked with during you time in IB?
Left IB for PE a few months ago and I can finally start investing again through my own portfolio which irrespective of the potential financial returns, is something I genuinely enjoy doing.
A few of the companies I worked with during my time in IB really caught my attention as great companies and interesting investing opportunities and I want to add them to my portfolio, but I am conscious of the risks of insider trading allegations. How much time needs to pass so that I am not considered an insider? 1 year, 6 months, 1 quarterly earnings...?
With one company in particular, we had a defence mandate where we to access to internal business plans. The risk now is, that I invest in the company and some PE firm puts a bid, making it look like I was privy to some information when I obviously had no idea about it as I left IB long before the bid.
To be clear, I have no insider information. I just want to avoid the risk of buying a few stocks and one of them ripping on an acquisition rumour making me look like I was trading on insider info. I'll eventually let an unnecessarily long time pass as I'm not going to risk a long term finance career for a few bucks on a personal portfolio, but any personal views or anecdotes are appreciated!
I am not a lawyer, and you should probably consult one before you make a potentially lifechanging decision. Also this is all based on US law and you spelled it "defence" so definitely ignore this if you're outside of the US.
The trick here is to not be a moron. The way I've always heard it explained is that if you buy (AND HOLD) the straight equity, and you don't, for example, know that they are about to lose a huge legal case, then after 90+ days, whatever your knew isn't relevant. If that strategic plan involved acquiring a public competitor and you bought a bunch of out-of-the-money calls on that competitor, the feds would probably still be interested.
My recollection of my banking days is that I rarely had information that would move the stock price more than 180 days out. I covered pharma, so in defense mandates, I sometimes found out that a drug was looking good for its phase III readout. If the strategic plan was just "do sales better, improve margins" there's no real special sauce there. If the strategic plan involved a business combination, new product launch, or something like that, probably go get an actual lawyer to opine.
Removed
The way I do it is this:
1. I have actual inside information about a company's potential business combination activities. Seren-freaking-dipity. It's not even from my data room or client meetings.
2. I have a stock account that is un-monitored by my bank. Ofc it's not under my name or my direct relatives' names. Ideally your GF/BF or best buddy, or someone who wants to get your info and willing to collaborate.
3. Get cash and pay your friend --- infuse capital into his/her account and there's no way to trace cash (learn from the drug dealers).
4. Whatever strategy you work on, win or lose money.
That’s bold. How much are you actually playing with/making?
My bank underpays significantly.
A small position for some low beta, low priced stocks.
Is your bank underpaying you a reason for the small account or a justification for doing it?
Interesting question and probably a yes. If I’m paid GS or Evercore level, won’t really think about this.
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