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I was hired by a large financial institution. On day one I was informed that I have to conform to organization's investment policy, which puts a number of restrictions on how I can manage my private investments. Some of those restrictions carry a real material risk (e.g. I'm not allowed to sell securities which I held for shorter duration than a certain period). They require that I disclose my and my partner's investing accounts.

There was no mention of this policy during a hiring process.

They do not state specifically what are the repercussions if I break the policy.

Should I've known about those policies before accepting the offer I would've taken that into consideration whether I should accept. Potentially this may not ever be an issue, but I definitely cannot guarantee it.

I'm not completely sure what would be the best way to go at the moment. I'm considering asking HR what would happen if I break the policy, but that probably would look like I'm saying "I'm going to break the rules, what are you gonna do?".

If I decide to stay and follow the policies, that would mean I'll be risking a financial loss.

If I decide that this is unacceptable, I've just wasted several weeks waiting for them to complete the hiring process, while I could pursue other opportunities.

An advice would be appreciated.

  • Nobody would know that. Don't worry. – SmallChess May 17 '17 at 0:58
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    These are investments handled by you on your own behalf? I could imagine that these constraints are to prevent conflict-of-interest; but, of course, domain-savvy individuals might be able to say more. – Captain Emacs May 17 '17 at 1:35
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    "They require that I disclose my and my partner's investing accounts." - what if you don't have any? – Brandin May 17 '17 at 5:33
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    I am a long term investor. I have some stocks I have held for over 30 years. I would still want to have the ability to say "Now that I see that news I know the purchase I made yesterday was a mistake, and I want out of it.". A required holding time before selling would prevent that. – Patricia Shanahan May 17 '17 at 12:00
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    Your question lacks focus. What are you looking for specifically? How to raise this issue with HR and presumably wording on how to ask for an exception to the policy? What impact violating said policy could have? Whether to stay or leave? Something else? The first question is a good one to ask here, the second is a question for a lawyer and the third is off-topic here. – Lilienthal May 17 '17 at 13:46
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I can give advice as I now work for a big consulting firm which does auditing. Even though I have only a technical role and have nothing to do with that side of the business and am not even in touch with anybody who is, there are massive implications on what I can do financially. This is not because of company policy but legislation, especially due to independence laws in my case.

For instance every year my wife and I would buy raffle tickets for a hospital here, but now we are no longer able as my firm administers the raffle. I also cannot buy/sell stock in certain companies, which we audit. Potentially even companies which we do consulting work for, different laws regulate these behaviours in different countries you will need to learn about how these laws effect you.

I am not aware of any laws which pertain to the minimum duration you are allowed to have stocks, but keep in mind that some of the policies will be very important to abide to. Also keep in mind whilst you might not be breaking any laws in the current country you are a resident you can still be charged in the US, even extradited, all this stuff is taken very seriously to the nth degree because of the cash which is involved.

As you progress through your career the restrictions get tougher, for instance I know partners here have to disclose pretty much all their investment information. We also have tools and a service to determine if you are compliant with the legislation and laws.

But I do stress that you can get into a lot of trouble if you are not compliant with these financial laws, can even be more serious than robbing, killing or other crimes. I would recommend you make use of your companies resources as well as any external professionals to make sure you are not breaking any laws.

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    Yes not complying can get you time in jail not just losing your job. Ask Martha Stewart about insider trading. – HLGEM May 17 '17 at 13:37
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If I decide to stay and follow the policies, that would mean I'll be risking a financial loss.

Speak to a fiduciary * regarding these policies to determine exactly what the risks are to your investments, and how likely they are to become a problem.

* (Fiduciaries are advisors who are required by law to act in your best interests, whereas financial advisors who are not fiduciaries have no obligation to do so.)

Also speak to HR (or perhaps your immediate supervisor) about these policies to clarify why they are necessary - instead of opening by asking what the penalties are for disobedience, try to focus on the reasons why these policies are in effect.

Between these two conversations, you may be able to find a way to restructure your investments such that your own needs are satisfied AND you're in compliance with the policies your employer demands.

If I decide that this is unacceptable, I've just wasted several weeks waiting for them to complete the hiring process, while I could pursue other opportunities.

Better to figure that out now than later. Also better to get out before these financial risks you're worried about come to pass. Besides, the time spent is not a total waste - you will now have some important new questions to ask in any future interviews with other financial institutions.

If worst comes to worst and you decide you cannot abide the policies in place, then quit and don't look back. Don't try to play fast and loose with the rules hoping you won't get caught, just cut your losses.

  • _ policies to clarify why they are necessary_ - they want to see long term investing, and frown upon any shorter term investments, which they consider speculative. Again, usually that's not an issue.. usually. – Jumphi May 17 '17 at 2:11
  • @Jumphi If long term investing is the objective, there should be possible compromises. For example, a long term investor holds most stocks for a reasonable time, but may sell quickly in exceptional circumstances. A day trader is the other way round. – Patricia Shanahan May 17 '17 at 14:09
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Financial services institutions often work with what is considered to be market sensitive data which could influence a share price if the knowledge became public - this ranges from everything such as what M&A deals are in process with a certain company to knowing that a certain bank is considering putting/calling a position on a stock.

The reason they ask you to conform to certain investment practices is due to insider trading laws related to access to this type of information and also due to conflict of interest.

By definition insider trading would be using any information that is not available publicly to take a position in the stock market, regardless of whether you profit or not from it.

Conflict of interest would be taking up investment positions in a potential partner of your company or company your are performing a service for.

These types of interactions are covered by financial regulators and companies are duty-bound to deal with infractions of the regulations very seriously, including taking actions from immediate dismissal as a minimum, to being reported to the regulating authority and barred from working in financial institutions in a particular country ever again at the maximum.

The company's position will not change on this policy, so I would look very hard at whether you want to continue working in this or any financial services institution as they will all have the same restrictions.

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    +1 You may want to add that the reason that the company won't change the policy is that the Securities Exchange Commission sets very strict regulations that affect the institutions and their employees. -Former employee of a major financial firm. – Richard U May 17 '17 at 12:55
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    And frankly, you should have known about these types of restrictions if you wanted to work in the Finance industry. They didn't think to tell you because everyone in the industry knows they have to meet such things. – HLGEM May 17 '17 at 13:36
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    @RichardU : Second last paragraph says "financial regulators" of which the SEC is one. ;) – toadflakz May 17 '17 at 13:55
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    @HLGEM: Tbf, if he had never worked in Finance, they should have told/asked him about his investment portfolio. Especially if he is at the point where he actually can afford to run one. – toadflakz May 17 '17 at 13:55
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    @HLGEM I didn't know about it either when I started. I worked for a newspaper that dealt with market data, which is also under SEC regulation. It's one of those things that, if you work in the industry you are so aware of, you never think of mentioning it, and if you are not, you don't think to ask. – Richard U May 17 '17 at 14:11
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Another way of phrasing your question is "How do I manage my investments while ensuring that I am not in contravention of a policy that I am being forced to adhere?"

You should investigate how to set up a blind trust with a financial planner and a lawyer, run the findings by your HR rep, and then do so. Yes it will cost a bit of money, but if your investment portfolio is of a reasonable size and if you plan to stay with this company for a medium-term or higher time horizon; it would be worth it in the long run to do so as this will prevent any conflict of interests between work and investments from happening.

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You might consider moving ownership of your investments to an LLC ($50 to establish one in Wyoming!)

Then, they're not your investments any more. Run this by a financial advisor, though.

Edit:

See this as reference.

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    This sounds like a good way to get in serious legal trouble. – A. McDaniel May 18 '17 at 1:30
  • Not really. An LLC can have a tax ID just like a natural person. Seems more like you're speculating vs having done your homework. Le sigh. See edit. – Xavier J May 18 '17 at 1:43
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    An LLC won't protect you from insider trading charges. – A. McDaniel May 18 '17 at 18:47
  • OP mentions private investments that don't have anything to do with the current employer. – Xavier J May 18 '17 at 20:07
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    That's not for you or him to decide, it's for the law and the company to decide. Using an LLC to circumvent policies in place to avoid legal trouble is still asking for legal trouble, even if you don't intentionally do anything illegal. Also, you are still liable for criminal actions you take as an LLC. – A. McDaniel May 18 '17 at 21:36

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