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Employee Trading Restrictions?

  • #1
  • First Post: Feb 26, 2010 5:10pm Feb 26, 2010 5:10pm
Alright guys,

So I've been lurking these forums for some time now, but finally decided to post to try and tap the well of information here. Essentially, I was recently hired by a major financial firm, and when interviewed - I was asked what hopes I had for the future. The main thing I said, was that I intended to eventually sustain myself by trading my own capital.

They neglected to inform me at that point, or any point prior to my acceptance of the job offer, that they have absurd trading restrictions on all employees.

These include:

Not being able to trade several of the major currencies, any security/mutual fund on their restricted list, and not being allowed accounts at other brokers.

Commissions are about 4 times higher than at other firms. Oh, and did I mention you can't actually get out of your position until a month passes or you lose 20% of your equity in the investment? That's the killer. Not to mention if your investment happens to be added onto the restricted list between when you purchased it/ when you can sell it, you're stuck with it.

So... I'm at a point of indecision. I plan on working here to build up capital and a reference while I continue to demo... But I was wondering on your thoughts about if they'd actually be able to tell if I was using a different broker?

Feel free to discuss these restrictions as well. I might be able to understand them if I was on the financial side of the firm.. but... wow.
  • #2
  • Feb 26, 2010 7:22pm Feb 26, 2010 7:22pm
Quoting Pepe le Pew
... But I was wondering on your thoughts about if they'd actually be able to tell if I was using a different broker?
Probably not, but what does this question say about your personal integrity. Stay there until you have learned enough and stored up your nest egg. Then leave before you open an account somewhere else.
  • #3
  • Feb 26, 2010 7:32pm Feb 26, 2010 7:32pm
There should be many more restrictions in my opinion. The American financial industry is rotten to the core and nobody working for them deserves a break. Get a real job producing something useful for people like food or painting houses. Obviously your boss is imcompetent in not informing you of the rules in advance and that further reinforces my opinion of the whole mess.
  • #4
  • Feb 26, 2010 7:38pm Feb 26, 2010 7:38pm
Quoting eclayf
Probably not, but what does this question say about your personal integrity. Stay there until you have learned enough and stored up your nest egg. Then leave before you open an account somewhere else.
The company policy is in place to protect them from any blame if an employee were to be accused of insider trading. I think I, as an individual, should take all blame for that anyway, so there should be no negative ramifications in any way towards the firm.

Also, when was the last time there was insider currency trading?

As for your suggestion, that's the current plan. I'm just exploring my options and trying to determine how much time I should devote to work, and how much to trading. It's hard to get passionate during 11 hour days when you know you'd have to leave to pursue your ambitions, rather than being able to extend that time.

Selfish? Probably.
  • #5
  • Feb 26, 2010 7:48pm Feb 26, 2010 7:48pm
Quoting CodeMeister
There should be many more restrictions in my opinion. The American financial industry is rotten to the core and nobody working for them deserves a break. Get a real job producing something useful for people like food or painting houses. Obviously your boss is imcompetent in not informing you of the rules in advance and that further reinforces my opinion of the whole mess.
Every industry has a plethora of bad apples Anyone who can complain about the job they have right now is a lucky man though.

I'm not sure I understand your hypocrisy, since your trading is contributing to society as much as the financial institutions. Both groups participate in increasing the liquidity of the world's wealth for consistent allocation to various investments.

Both retail traders, and corporations do it for selfish purposes.
  • #6
  • Feb 26, 2010 9:08pm Feb 26, 2010 9:08pm
'Inside Information' trading is common in FX, so is front running and other strategies that are looked down upon in other trading arenas, plus it's all legal. FX is pretty much unregulated. As of late there have been some measures to fix this, but big money is in control and will win any legislative fight.

Seems like a silly rule to me. Especially if you just want to trade a small retail account. With all the privacy rules in the world today, I don't see how your employer could ever know. Try calling Oanda and ask if they'll tell you whether or not Joe Schmoe has an account with them. Good luck with that.

The only problem you'd have is if you were breaking some law. If you're registered with the SEC in any way then you might be treading into dangerous waters. But I still think it's a dumb rule.

The bank traders make a killing everyday doing the things mentioned above. Trading is a bloodbath, get used to it. Kill or be killed.
  • #7
  • Feb 26, 2010 9:14pm Feb 26, 2010 9:14pm
One more thing.. It takes years of hard work to become a consistently profitable trader anyway. You'd be better off just keeping the job in the long run. Learn what you can and if you prove yourself then jump into the trading part later down the road. Theres no sense in throwing your money and your job away at the same time.
  • #8
  • Feb 26, 2010 9:28pm Feb 26, 2010 9:28pm
It's called an "Non Compete Clause"

Every Investment firm, hedge fund, & bank has Non Compete Clauses. In the financial world, you can't get a job without signing one with ANY firm that decides to take you on for employment and/or Outside Contract postions.

If you decided to go with this company, you NEED TO READ the clause and understand it fully before signing anything. There is one part in the clause that most people tend to overlook until it time for them to leave that employment. One common stipulation is: Time After Employment. By excepting employment/clause you CAN NOT work companies in the industry of Investments, that includes any personal endevors such as trading for yourself for one year/two years/three years after termination of employment.

Time After Employment is one of the "gotcha's" with Compete clauses. One that many people have overlooked and if you think you can break that contract, you can't. If your contact states you can't work in Investments, Banking, Insurance, or the many job titles in the financial world for two years after employment, then you can't work in those industries for two years. Believe me, once you leave the company will keep tabs on you, especially if it one of the major Banks like Goldman, DB, Morgan etc. Break that contact and they will have you ass stuck in litigation and financially ruined.

So, read what you sign and take everything serious. Need clarification on anything in the contract, seek a lawyers helps. BTW, I'm not a lawyer! I do have personal experience with employment clauses and I am giving you ONLY MY PERSONAL OPINION on the subject matter at hand.

Read up on CNC
http://en.wikipedia.org/wiki/Non-compete_clause
http://www.google.com/#hl=en&q=non+c...0664e20ac2de1f
  • #9
  • Feb 27, 2010 7:37am Feb 27, 2010 7:37am
Quoting Jhig
It's called an "Non Compete Clause"

Every Investment firm, hedge fund, & bank has Non Compete Clauses. In the financial world, you can't get a job without signing one with ANY firm that decides to take you on for employment and/or Outside Contract postions.

If you decided to go with this company, you NEED TO READ the clause and understand it fully before signing anything. There is one part in the clause that most people tend to overlook until it time for them to leave that employment. One common stipulation is: Time After Employment. By excepting...
I appreciate the heads up. I did make sure that I didn't have to sign any non-compete clauses. There was a 'no sharing confidential information' clause, that is considered a life-long thing. Perhaps this was because I'm in the back office and not front office.

After my first apartment lease, I never sign anything without reading it thoroughly .
  • #10
  • Feb 27, 2010 7:43am Feb 27, 2010 7:43am
Quoting Scotty B
One more thing.. It takes years of hard work to become a consistently profitable trader anyway. You'd be better off just keeping the job in the long run. Learn what you can and if you prove yourself then jump into the trading part later down the road. Theres no sense in throwing your money and your job away at the same time.
I'm not looking to get rich quick. I just know that I want to work to live, not live to work. 60 hour work weeks leave me wondering what the hell I'm living for, and I'll surely take a pay cut if it means actually enjoying life. I imagine I'm not the only one who is motivated by this.

I should add that I've followed the markets for years, but never had the capital to see if I could perform adequately with the psychological game. Admittedly, I did play online poker successfully for 2 years and was consistently profitable. I'm able to distance myself from investments dealing with probability. I believe this will give me an edge I can leverage to at least make a large enough income to live frugally on, once I have some decent investment capital.

My one reason for wanting to trade while still working for the firm is to ensure that I can stay profitable when using live money. I'd rather not quit and then find out I can't sustain it. I'm not one of those guys who pretty much screws themselves psychologically by quitting and having to try and pay the bills in a profession they hardly know.

I think that qualifies me to at least try eh ?
  • #11
  • Mar 1, 2010 1:07am Mar 1, 2010 1:07am
Quoting CodeMeister
There should be many more restrictions in my opinion. The American financial industry is rotten to the core and nobody working for them deserves a break. Get a real job producing something useful for people like food or painting houses. Obviously your boss is imcompetent in not informing you of the rules in advance and that further reinforces my opinion of the whole mess.

wow dude. wow. is that michael moore i see behind your avatar? dont be a hypocrite. your trading doesnt contribute crap to society. at least when those guys make money, they buy fancy expensive crap which people make. those people have to hire people to make the crap and those employees take home the money and buy groceries and cars and whatever. they are doing more for society by being rich and spending tons of money in a week than you ever will in your entire lifetime. more restrictions and more rules leave room for loopholes. the only reason we are in this mess is because there were so many restrictions and loopholes for these guys to gain an advantage that wouldnt exist in a true capitalist society.
  • #12
  • Mar 2, 2010 8:03am Mar 2, 2010 8:03am
Quoting Jhig
Time After Employment is one of the "gotcha's" with Compete clauses. One that many people have overlooked and if you think you can break that contract, you can't. If your contact states you can't work in Investments, Banking, Insurance, or the many job titles in the financial world for two years after employment, then you can't work in those industries for two years. Believe me, once you leave the company will keep tabs on you, especially if it one of the major Banks like Goldman, DB, Morgan etc. Break that contact and they will have you ass stuck...
"Time After Employment" used to be a much bigger issue. However; when the Internet started to effect jobs, it changes things dramatically. There was a case regarding this exact issue about 9 years ago where a company sued a previous employee over accepting a job with a DIRECT competitor, not just "in the industry" and the end result was a decision by the judge that the Internet has sped up the flow of information to the point that any such contract with a period of more than six months was non-enforceable because the business standards, models and information changed so rapidly as to render such a clause useless and prohibitive.

So, no you can't 'get out' of a contract like this, but the enforcement is pretty tough anymore for this particular clause.
  • #13
  • Mar 2, 2010 8:23am Mar 2, 2010 8:23am
Quoting eclayf
"Time After Employment" used to be a much bigger issue. However; when the Internet started to effect jobs, it changes things dramatically. There was a case regarding this exact issue about 9 years ago where a company sued a previous employee over accepting a job with a DIRECT competitor, not just "in the industry" and the end result was a decision by the judge that the Internet has sped up the flow of information to the point that any such contract with a period of more than six months was non-enforceable because the business standards, models...
Oh of course eclayf,
I was stating a demonstration, a example of dates if you will ... though I hope no one ever signs a 2 year clause. Though I do know of an investment firm with a clause of 18 months!

I liitle excessive, but I understand with all the trading secrets and proprietary methods investment companies have developed. I, myself haven't been a victim of Clause breakage, though my trading company's (I'm the owner) clause is only for 5 months and there is nothing we do that is considered proprietary, except for profiting
  • #14
  • Last Post: Edited 9:07am Mar 2, 2010 9:05am | Edited 9:07am
Quoting Jhig
...I was stating a demonstration...
That's cool Jhig. I have personally signed looooooooooots of non-compete and non-circumvention clauses as a business consultant a few years back when I was involved in a couple of small VC funds. They are never really much of a problem and to be honest there is very little that can really be classified as "proprietary" anymore.

The main issue for me has always been the personal integrity of someone who is actively looking for a way around the issue.

In trading for example, six months would probably be the maximum enforceable contract anyway for lots of reasons. The rapidity with which information is distributed though the Internet, the extreme rapidity with which the markets have been changing over the past two years just to name a couple.

I have no problem with someone who wants to learn and not even with someone who goes to work with the ultimate goal of becoming personally successful. It all goes back to personal integrity.

Why not get all the exposure you can, master your craft by whatever means you choose, then simply work somewhere else for a period of time, say six months to let the contract (if if was entered into in good faith on both parts) expire.

Good trading to you all.
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