Advice on weird SA dilemma

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Anonymous User
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Advice on weird SA dilemma

Postby Anonymous User » Mon Jul 23, 2012 10:10 pm

I'm completing my SA as a 2L at a V50 firm in DC/NY. I've had a great summer so far, no problems and good reviews. But, I was told that they are worried about my stock trading activities. I'm certainly not a pattern day trader by any means, but I am relatively active and keep my own portfolio and really don't want to go put my money in a mutual fund or become a passive investor to get around the trading policies.

I've made around 10 trades over the course of the summer and received clearance for all of them. I'm wondering whether they are just being lazy and that they are tired of clearing my trades, or is big law really this incompatible with being a somewhat active investor. Has anyone had any close experiences to this or is this an anomaly? I didn't think trading would be this big of an issue from what I've heard from others.

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thesealocust
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Re: Advice on weird SA dilemma

Postby thesealocust » Mon Jul 23, 2012 10:16 pm

Holy shit. Immediately stop trading.

Clearance is for when you HAVE to move your securities around, like for retirement planning. One of the costs of working in a firm like this is that you can't participate in the public stock market in the same way, because even as an SA you are entrusted with mounds of material nonpublic information.

Big red flags for the employer, and for the SEC. There have been massive scandals where relatively low-rung lawyers in biglaw firms have misappropriated information to make huge insider trading profits, and it's always a big black eye for everyone involved.

Besides, you should be able to do just fine with boring 'ol index funds - especially on a biglaw salary.

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sunynp
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Re: Advice on weird SA dilemma

Postby sunynp » Mon Jul 23, 2012 10:16 pm

Anonymous User wrote:I'm completing my SA as a 2L at a V50 firm in DC/NY. I've had a great summer so far, no problems and good reviews. But, I was told that they are worried about my stock trading activities. I'm certainly not a pattern day trader by any means, but I am relatively active and keep my own portfolio and really don't want to go put my money in a mutual fund or become a passive investor to get around the trading policies.

I've made around 10 trades over the course of the summer and received clearance for all of them. I'm wondering whether they are just being lazy and that they are tired of clearing my trades, or is big law really this incompatible with being a somewhat active investor. Has anyone had any close experiences to this or is this an anomaly? I didn't think trading would be this big of an issue from what I've heard from others.


Do you understand why they are concerned with your trading? If so, why do you think it is unreasonable?

edit: I see the poster above me explained it to you.

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romothesavior
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Re: Advice on weird SA dilemma

Postby romothesavior » Mon Jul 23, 2012 10:19 pm

Today, I learned something. Thank you Sir Locust.

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Re: Advice on weird SA dilemma

Postby Anonymous User » Mon Jul 23, 2012 10:26 pm

So are you saying I should liquidate my portfolio before beginning biglaw next year? Are you at least allowed to wind it down using trades once you begin assuming you get clearance for each trade?

What about trading during my 3L year? Obviously the first question would be a threshold question since I wouldn't want to open new positions if I simply had to liquidate them.

I always assumed you were allowed to trade as long as the trades were cleared by the firm. People have told me this and I thought this was generally the policy.

rad lulz
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Re: Advice on weird SA dilemma

Postby rad lulz » Mon Jul 23, 2012 10:30 pm

thesealocust wrote:Holy shit. Immediately stop trading.

Clearance is for when you HAVE to move your securities around, like for retirement planning. One of the costs of working in a firm like this is that you can't participate in the public stock market in the same way, because even as an SA you are entrusted with mounds of material nonpublic information.

Big red flags for the employer, and for the SEC. There have been massive scandals where relatively low-rung lawyers in biglaw firms have misappropriated information to make huge insider trading profits, and it's always a big black eye for everyone involved.

Besides, you should be able to do just fine with boring 'ol index funds - especially on a biglaw salary.

Huh. Learn something new erryday. Good thing I'd be a shit investor anyway.

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sunynp
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Re: Advice on weird SA dilemma

Postby sunynp » Mon Jul 23, 2012 10:33 pm

Anonymous User wrote:So are you saying I should liquidate my portfolio before beginning biglaw next year? Are you at least allowed to wind it down using trades once you begin assuming you get clearance for each trade?

What about trading during my 3L year? Obviously the first question would be a threshold question since I wouldn't want to open new positions if I simply had to liquidate them.

I always assumed you were allowed to trade as long as the trades were cleared by the firm. People have told me this and I thought this was generally the policy.


Trades are allowed if they are cleared by the firm. But it isn't just the insider information that matters, your trades can have other impacts on the firm.

I would talk to the firm and tell them that you hear them on this issue, and ask what they suggest you do. I don't think you have to liquidate, but you should limit your trades, maybe only keep stocks you want to hold for the long-term. Get their advice so you can be sure to be in full compliance without unnecessarily limiting yourself.

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thesealocust
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Re: Advice on weird SA dilemma

Postby thesealocust » Mon Jul 23, 2012 10:44 pm

Part of the problem is that even if the firm was fine doing clearences quickly an repeatedly, you could get screwed personally. Let's say you have a big position in company X and company Y. You read up on the markets and decide you should sell them, and you file for clearance. It comes back with a big no, because your partner mentor just signed on to represent firm x in bankruptcy and your office mate is working with firm y against a shareholder suit. Uh oh! You now basically can't sell your stock. While it's technically a defense to insider trading laws that your trade wasn't made because of the material nonpublic information, you would have a hell of a time making that argument if the SEC came knocking.

As far as I know, most people in big firms just stick to index fund or actively managed investments. You can have all of your money in the market, even leveraged and risky bets - you just can't (easily) be directing the investments and keeping client confidences at the same time.

As for 3L year, go nuts. I day traded a good amount my 3L year, but always knowing that I would liquidate before starting at the firm. That's a personal choice - clearance isn't something you can NEVER do, but 10 trades over the summer is definitely excessive.

Here's some reading material - this list has three (recent) law firm scandals on it: http://www.sec.gov/spotlight/insidertrading/cases.shtml

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Re: Advice on weird SA dilemma

Postby Anonymous User » Mon Jul 23, 2012 10:49 pm

thesealocust wrote:Part of the problem is that even if the firm was fine doing clearences quickly an repeatedly, you could get screwed personally. Let's say you have a big position in company X and company Y. You read up on the markets and decide you should sell them, and you file for clearance. It comes back with a big no, because your partner mentor just signed on to represent firm x in bankruptcy and your office mate is working with firm y against a shareholder suit. Uh oh! You now basically can't sell your stock. While it's technically a defense to insider trading laws that your trade wasn't made because of the material nonpublic information, you would have a hell of a time getting it to hold up.

As far as I know, most people in big firms just stick to index fund or actively managed investments. You can have all of your money in the market, even leveraged and risky bets - you just can't (easily) be directing the investments and keeping client confidences at the same time.

As for 3L year, go nuts. I day traded a good amount my 3L year, but always knowing that I would liquidate before starting at the firm. That's a personal choice - clearance isn't something you can NEVER do, but 10 trades over the summer is definitely excessive.


Yeah, I mean that all made sense to me. I always just figured say if I opened that huge position in Company X and Y and those conflicts then arose, then the clearance would simply just deny me - and getting screwed here is simply the risk of trading as an attorney.

I guess I never took it all the way to think that it would basically bar active trading of any sort. I know the firm wants to prevent impropriety or any remote sense of impropriety even, which is why I thought the clearance policies would be extremely conservative and bar your trading even if you weren't involved in the deal/case that created the conflict.

It just seems odd that if you think company Z is undervalued, and you want to purchase it and your firm has cleared that it doesn't represent or deal with it, that an attorney should think long and hard twice before making the trade.

chasgoose
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Re: Advice on weird SA dilemma

Postby chasgoose » Mon Jul 23, 2012 11:02 pm

Firms don't want to see a young associate as a potential ethical violation. Remember, to a big law firm, young associates are very replaceable bodies (even if they have invested a lot in you). If your firm has already commented on your trading as a summer that's not good. You don't want to risk standing out negatively for what is essentially a hobby. Also, as you and others have commented, it's a risky position to be in where you could get stuck holding the bag if your firm takes on a certain client before you can dump the stock even if there was no inside info involved.




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