Analyst Discovers Hot New Stock: What to Do?

Great Debates
21

[QUOTE=DSeid]
Under the hypothetical that would still be unethical and while IANAL seems to me like theft of IP. I would imagine that such is prosecutable and that the company could rightfully claim any proceeds from such an action as theirs. If he didn’t like those terms he shouldn’t have signed onto the contract.

Let’s make a more real-life example. A scientist works for a university and using university resources creates a patentable intellectual property of substantial value. Can he just quit and take his idea with him and effectively trade on it? Or does that piece of paper that he signed stating the terms of ownership of IP created by him during the terms of his employ hold?
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Why would it be unethical? His job is to give his clients good tips, if he quits, then he’s acting in his own interest and not competing with the company so long as he doesn’t give advice to his clients. The stock trading company didn’t do any of the research or development of the technology. You would have to demonstrate that he would have had no possible way of ever knowing about the company outside of the job. One press release or piss-ant article about them ought to be enough. Doesn’t IP usually refer to new ideas and creative property? Somebody tell me you can’t claim IP on what amounts to “What some bloke down the pub said”.

22

[QUOTE=Acid Lamp]
Doesn’t IP usually refer to new ideas and creative property? Somebody tell me you can’t claim IP on what amounts to “What some bloke down the pub said”.
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The argument would be that information he put together while on the clock with the company was a trade secret. Presumably, what has led him to think the company is good is the process of aggregating and analyzing data that are, individually, in the public domain. That analysis is the value-add and would, depending on his contract and on state law, arguably be a trade secret belonging to the employer.

23

[QUOTE=Acid Lamp]
You would have to demonstrate that he would have had no possible way of ever knowing about the company outside of the job. One press release or piss-ant article about them ought to be enough.
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If he’s using information that he received only because of his position as an analyst, the company that employed him is going to have a problem with it. Most people don’t get invited to have conference calls with management, attend industry shows or tour facilities. Maybe if they already own stock in the company, but people off the street don’t. Analysts get to do stuff like that as part of doing their jobs.

24

[QUOTE=Acid Lamp]
Why would it be unethical? His job is to give his clients good tips, if he quits, then he’s acting in his own interest and not competing with the company so long as he doesn’t give advice to his clients. The stock trading company didn’t do any of the research or development of the technology. You would have to demonstrate that he would have had no possible way of ever knowing about the company outside of the job. One press release or piss-ant article about them ought to be enough. Doesn’t IP usually refer to new ideas and creative property? Somebody tell me you can’t claim IP on what amounts to “What some bloke down the pub said”.
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If it is a press release, then it is public knowledge, but it also means that no one is going to make a fortune on it. As for the bloke, when you take IP training you are told that not only can’t you take IP, or actively look for it in another company, but you can’t accept it from someone else.

Not that your average analyst is going to quit his job and invest in a company because of something he overheard.

Many companies, by the way, require legal clearance of anything you produce on your own time that is remotely connected to the main business.. If a game developer writes an sf book, he probably won’t have to clear it, but if he writes his own game at home he will.

This is based on IP rules for computer companies - I rather suspect those for financial companies are reasonably similar. You sure as hell can’t take a client list with you when you leave, I know that.

25

Under the hypothetical the

Pretty straight forward. You did the analysis as part of your job using resources and tools that they provided and agreed that the products of such an analysis belonged to them.

Correct to Huerta88 that it depends on the terms of the contract but this hypothetical is quite clear what those terms are. It doesn’t matter that he could’ve come to the same conclusion on his own time without their resources at his disposal, any more than a screenwriter contract to a production house has a right to sell his scripts somewhere else when he produced them under contract, even though he could’ve thought of the story line sitting at home or in the coffee bar just as easily. He does not own his ideas. He already sold them on spec.

26

[QUOTE=Voyager]
You sure as hell can’t take a client list with you when you leave, I know that.
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They are not supposed to, but you would be surprised at the jockeying that occurs the second someone does leave. Everyone knows that the departing broker will call his old clients and try to get them to follow him (and may have already started the process before he ‘officially’ gave notice, so his clients are divided and the firm goes all out to retain them, especially the most profitable ones. When called on the carpet for poaching clients, the most common refrain is “I didn’t contact the client to follow me, the client contacted and followed me on his/her own.”

27

[QUOTE=D_Odds]
They are not supposed to, but you would be surprised at the jockeying that occurs the second someone does leave. Everyone knows that the departing broker will call his old clients and try to get them to follow him (and may have already started the process before he ‘officially’ gave notice, so his clients are divided and the firm goes all out to retain them, especially the most profitable ones. When called on the carpet for poaching clients, the most common refrain is “I didn’t contact the client to follow me, the client contacted and followed me on his/her own.”
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I should have said legally. I get calls all the time from salesmen at their new company. I know you are not allowed to take phone directories and databases, but I’m not sure of the legal status of a good memory.

28

I can understand the concept of where the company’s argument is, I suppose, (though it all seems really shady to me); but I’m still not seeing the conflict of ethics. When you are an employee you are bound by your contract, when you quit you are free do as you please unless you signed something otherwise. I could see the conflict if he kept a client list and set up an opposing business, but merely acting in his own self interest seems the basis of capitalism. he isn’t selling the information, he is merely using his skills to help himself. As a trained analyst he can apply his skills to anything right?

It’s like saying that since I’m a sculptor, I can only do projects when somebody else pays for them, and keeping a copy for myself of my own work, for my own use is unethical. I should, if I understand this correctly, purchase a copy of my own work if I’d like to enjoy it.

29

[QUOTE=Voyager]
I should have said legally. I get calls all the time from salesmen at their new company. I know you are not allowed to take phone directories and databases, but I’m not sure of the legal status of a good memory.
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Good memory for client contacts is not misappropriation. Physical rolodexes are more controversial – the argument will always be (from the employee) “but I have my personal contacts in there too.”

There’s a separate issue wrt the non-compete provisions of the employee’s contract, if there was such clause.

30

[QUOTE=Acid Lamp]
It’s like saying that since I’m a sculptor, I can only do projects when somebody else pays for them, and keeping a copy for myself of my own work, for my own use is unethical. I should, if I understand this correctly, purchase a copy of my own work if I’d like to enjoy it.
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Well, if someone commissions you as a sculptor, pays for your studio, and provides you with materials, plus you sign a contract stating that your work in that studio with those materials belongs to your employer, then you cannot keep a copy of your own work.

Alternately, you can set up a home studio, buy your own materials, and start doing work on the side. But then your employer has a valid issue regarding where your sculpting loyalties lie. Are you still giving your best work to your employer, or are you more committed to creating your own business?

31

You are still assuming that I’m going to compete. You might have a point about material cost, but that is only relevant to a physical product. ( In the case of art, artists always receive gratis copies and retain portfolio rights anyway) The company’s position would be unethical because without the creator, they would not have the product anyway. Providing finance entitles you to reap the benefits from SALES, but how can you sell an idea back to it’s creator?

In the case of the OP the product is an intellectual analysis, and the benefit is only to the creator of said intellectual material. He is NOT selling his information, stealing clients, or otherwise benefiting from his product in a commercial sense. He is taking his own advice. Since he is no longer an employee, and is not providing a competing service I still fail to see any ethical dilemma. The OP did not state that he signed any sort of IP agreement, much less one that would affect material when he is no longer employed.

I want to know how it would be unethical, not breech of contract, (which the OP didn’t specify).

32

[QUOTE=Acid Lamp]
You are still assuming that I’m going to compete. You might have a point about material cost, but that is only relevant to a physical product. ( In the case of art, artists always receive gratis copies and retain portfolio rights anyway) The company’s position would be unethical because without the creator, they would not have the product anyway. Providing finance entitles you to reap the benefits from SALES, but how can you sell an idea back to it’s creator?

In the case of the OP the product is an intellectual analysis, and the benefit is only to the creator of said intellectual material. He is NOT selling his information, stealing clients, or otherwise benefiting from his product in a commercial sense. He is taking his own advice. Since he is no longer an employee, and is not providing a competing service I still fail to see any ethical dilemma. The OP did not state that he signed any sort of IP agreement, much less one that would affect material when he is no longer employed.

I want to know how it would be unethical, not breech of contract, (which the OP didn’t specify).
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First of all, if it is a breach of a contract mutually agreed to, breaking it is unethical.

The product of the analyst’s work is owned by the company. The product, in this case, is the recommendation. Leaving a company does not change the ownership of work done for the company, and the fact that he is the creator has no bearing.

Now, if the company approved the publication of the recommendation to all, that is a different matter. Then there is no ethical problem with him using the results just like anyone else. If they publish it to clients only, and he quits and becomes a client, then there is still no problem. In either of these cases he is unlikely to make a killing. The publication must be fair and accurate. If he makes a very lukewarm recommendation to keep people from acting on it while knowing that the opportunity is much better, then he is still acting unethically.

Until it is published the analysis is a trade secret (often the default, and I bet marked on the document by default.) Stealing a trade secret for personal use, even one you created, is unethical.

Maybe an easier example is copyrighted material. If you write something for hire for a company, and agree that they own the copyright, you can’t sell it yourself or even use it without somewhere else without express permission of the copyright owner.

33

[QUOTE=Voyager]

The product of the analyst’s work is owned by the company. The product, in this case, is the recommendation. Leaving a company does not change the ownership of work done for the company, and the fact that he is the creator has no bearing.

Now, if the company approved the publication of the recommendation to all, that is a different matter. Then there is no ethical problem with him using the results just like anyone else. If they publish it to clients only, and he quits and becomes a client, then there is still no problem. In either of these cases he is unlikely to make a killing. The publication must be fair and accurate. If he makes a very lukewarm recommendation to keep people from acting on it while knowing that the opportunity is much better, then he is still acting unethically.

Until it is published the analysis is a trade secret (often the default, and I bet marked on the document by default.) Stealing a trade secret for personal use, even one you created, is unethical.

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snip mine

I’m sorry but this makes no sense to me. I’ll freely admit I do not understand stocks and finance, but I don’t understand how one is acting unethically by taking one’s own recommendation to build your own portfolio.

What is sounds like to me is that there is a network of “in the know the guys” whom you have to pay off if you want to play. :dubious: Further, it sounds like that they’ve manipulated the industry so that you cannot act without them. This does not sound like an open market. I thought I could buy stock in any company that allows non employees to do so?

34

[QUOTE=Acid Lamp]
snip mine

I’m sorry but this makes no sense to me. I’ll freely admit I do not understand stocks and finance, but I don’t understand how one is acting unethically by taking one’s own recommendation to build your own portfolio.

What is sounds like to me is that there is a network of “in the know the guys” whom you have to pay off if you want to play. :dubious: Further, it sounds like that they’ve manipulated the industry so that you cannot act without them. This does not sound like an open market. I thought I could buy stock in any company that allows non employees to do so?
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Buying the stock has nothing to do with it. If you are in possession of inside information about a company, you can’t buy (or sell) that companies stock whether you are an employee or not.

Not that long ago the rules were changed to prohibit private calls to analysts, if I remember correctly. Today anyone is theoretically allowed to listen in, or the transcript is published.

What kind of company do you work for? You don’t seem to grasp that your recommendation is not yours, it belongs to the company. If I think up an invention at work, or relevant to work, I don’t own it. I agreed, in return for getting paid, that the company owns it. I have four patents, and I don’t get royalties on any of them (or wouldn’t if they actually produced royalties.) I got a bonus for the two I did at my current company, but at the Bell Labs center I was at you get a nice plaque for your first and a cheap folder for the rest. Knowledge workers, like your analyst, agree to sell the fruits of their knowledge exclusively to their company in return for pay.
It is an open market, since the analyst is free to leave and do his own research, and make use of it. He just can’t use the research paid for by his company for his personal profit.

35

I’m a sculptor. Besides that work, I teach art. I have been approached before by previous employers that wanted me to sign that type of agreement. I refused, but was never fired for doing so. How you can allow someone to profit from your original material I’ll never know. I have no problem selling an idea, but unless my job is to think up ideas, it seems unethical and downright abusive of an employer to have the gall to think that anything thought up by their employees is theirs.

36

[QUOTE=Acid Lamp]
snip mine

I’m sorry but this makes no sense to me. I’ll freely admit I do not understand stocks and finance, but I don’t understand how one is acting unethically by taking one’s own recommendation to build your own portfolio.
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You cannot “front-run” a recommendation. Also, employees of asset managers, investment banks, and accounting firms have very strict rules regarding what they can buy and when. Simply put, you cannot buy any security that your firm is touting or buying (it is more complicated than that, but I’ll not delve into the nitty details here). Front-running a recommendation is the very definition of insider trading. If you leave the firm before acting on it and do not tell the firm your recommendation, you are still skating on thin ice (and yes, the firm would know what securities you were researching).

Secondly, most employment contracts in this industry do specifically state the your work is owned by the company. You are using the company’s resources, the company’s time (as evidenced by your salary), the company’s expense account (if you make site visits), etc. in order to make your recommendation. In return, the firm owns your output, intellectual or otherwise. If you decide to leave, you used the firms resources to come up with your intellectual capital, then left before the firm can recoup its investment in you. The firm employs you specifically for your ideas, and you are essentially stealing one.

37

[QUOTE=Acid Lamp]
I’m a sculptor. Besides that work, I teach art. I have been approached before by previous employers that wanted me to sign that type of agreement. I refused, but was never fired for doing so. How you can allow someone to profit from your original material I’ll never know. I have no problem selling an idea, but unless my job is to think up ideas, it seems unethical and downright abusive of an employer to have the gall to think that anything thought up by their employees is theirs.
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I’m not sure I understand the context of employer for you. If the employment is teaching, I certainly agree that it is absurd of them to want rights to the sculptures you make outside of class time, which have nothing to do with class. If you are being paid to sculpt, though, why wouldn’t your employer own the rights to what you produce?

I get paid for thinking, and have no problem with my employer owning my ideas. If they weren’t paying me, I wouldn’t have the time, the facilities, and the inputs to have them. Everyone has the right to negotiate whatever IP deals they wish to, but holding out for both salary and IP rights is unlikely to get you a job, at least in the computer biz.

38

[QUOTE=ralph124c]

…a firm that has patented a new process for turnng garbage into high-quality gasoline. The process works, is economical, and is easily scaled up-the USA could have plants running within a few years. This compony and its patenst will be worth a fortuen
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If this is Changing World Technologies you are referring to, the process has been publically known for quite a while.

39

[QUOTE=Voyager]
I’m not sure I understand the context of employer for you. If the employment is teaching, I certainly agree that it is absurd of them to want rights to the sculptures you make outside of class time, which have nothing to do with class. If you are being paid to sculpt, though, why wouldn’t your employer own the rights to what you produce?

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I was less than clear, sorry.

Think of it this way: If Fatcat productions hires me to design a creature for their new model series, they are entitled to that model, and it’s directly relevant material. (final production sketches, etc)

Fatcat is NOT entitled to rifle through my sketchbook, and rough sculpts and take whatever they choose as their own material if it isn’t relevant to the design they hired me to do. Sculpts take weeks, I might do loads of throw-aways and one-offs until I present them with a first design. They are not entitled to assume all my early throw away designs and doodles that I didn’t present to them and use it to make further productions.

40

[QUOTE=Acid Lamp]
I was less than clear, sorry.

Think of it this way: If Fatcat productions hires me to design a creature for their new model series, they are entitled to that model, and it’s directly relevant material. (final production sketches, etc)

Fatcat is NOT entitled to rifle through my sketchbook, and rough sculpts and take whatever they choose as their own material if it isn’t relevant to the design they hired me to do. Sculpts take weeks, I might do loads of throw-aways and one-offs until I present them with a first design. They are not entitled to assume all my early throw away designs and doodles that I didn’t present to them and use it to make further productions.
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Are you doing work for hire for them? My wife is a freelance writer, and so does work for hire all the time, and she’s never even got the glimmer of an idea that one of her clients think she’s entitled to anything but the contracted article. On the other hand, if you are a full time if temporary employee, then I can kind of see it.