Non-Competes for IB Analysts

ChrixGenerally not in force at junior level - starts at associate (1mth) - VP (3-6mths)

Sorry, but to be clear - you're saying they DO definitely exist as a standard part of an EA, but ARE NOT generally enforced? Or are you saying they're usually not in junior level contracts (analyst)? Any sense/potential in trying to have it removed/reduced or not?

Thanks a lot for your answer! Much appreciated.

ChrixSry, to be clear - do not generally exist at junior level

Thank you!

ChrixSry, to be clear - do not generally exist at junior level

+1SB

re-ib-nyThere is generally NO non-compete in a junior banker's employment agreement. At more senior levels, standard practice is to have a "garden leave" requirement. So when a senior banker leaves for another bank, the bank he is leaving requires him to wait a certain number of days before he starts (it's often a month for VPs, two for Directors, three for MDs, or something like that). The former employer continues to pay salary during the garden leave...so it's basically just a paid vacation. Analysts and associates can generally leave at-will.

Buy-side funds would not normally be characterized as competition. After all, the business is entirely different. To an investment bank, a private equity fund is a client or potential client, not a competitor. What can be a very mild restraint to exit is the signing bonus, which most banks require analysts to repay (sometimes on a pro rated basis) if they resign within a year. That period has often expired by the time analysts recruit for buy side funds. Funds that take analysts before that period will sometimes buy out the obligation.

Thanks a ton! Makes a lot of sense. Was recently examining a sample EA for a friend and there appears to be a non-compete/non-solicitation clause, with a 2 year period! Need to re-read it though so I know EXACTLY what it is referring to/implying. Perhaps it is different because it is a boutique. A little disconcerting for sure given that he is at such a junior level (analyst) and the period is so long.

re-ib-nyThere is generally NO non-compete in a junior banker's employment agreement. At more senior levels, standard practice is to have a "garden leave" requirement. So when a senior banker leaves for another bank, the bank he is leaving requires him to wait a certain number of days before he starts (it's often a month for VPs, two for Directors, three for MDs, or something like that). The former employer continues to pay salary during the garden leave...so it's basically just a paid vacation. Analysts and associates can generally leave at-will.

Buy-side funds would not normally be characterized as competition. After all, the business is entirely different. To an investment bank, a private equity fund is a client or potential client, not a competitor. What can be a very mild restraint to exit is the signing bonus, which most banks require analysts to repay (sometimes on a pro rated basis) if they resign within a year. That period has often expired by the time analysts recruit for buy side funds. Funds that take analysts before that period will sometimes buy out the obligation.

+1SB

re-ib-ny So when a senior banker leaves for another bank, the bank he is leaving requires him to wait a certain number of days before he starts (it's often a month for VPs, two for Directors, three for MDs, or something like that). The former employer continues to pay salary during the garden leave...so it's basically just a paid vacation.

Agreed, the only downside is that you are not accruing any bonus. So, at those levels you are getting a small percentage of your total comp. Normally, you would negotiate a guarantee at your next place that would make up that difference though.