Hawk,
I've been a lurker here for 3 years and just signed up, so forgive any awkwardness. However, this issue- analysts trading their own accounts- seems to come up often, so I thought I'd add my own observations.
I was a sell-side analyst for 30 years(largely with the same firm, although four name changes made me seem like more of a job hopper). Our policy- and the director of research, who saw all trades, would break a trade in violation-was: analysts could:
buy- and ONLY BUY- his/her stocks rated 1 (recommended list) or 2 (outperform);
sell- and ONLY SELL- his/her stocks rated 4 or 5
(I was never clear about stocks rated 3- "market perform").
Reason: we didn't want to be "humiliated" in the press; i.e."Analyst sells stock he/she is 'recommending'(i.e., rated "2")"(remember Jeff Vinik and MU?).
Means: If I, say, downgraded Intel from "1" to "2", the message would be clear- but if I owned the stock, I could not sell it. I always felt that a 1-5 scale was BS and allowed for too many cop outs. 1-3, at most, would keep analysts honest (if that was possible- at our firm, it would have been).
Again, I don't know about other firms explicitly- but I do know some forbade ANY trading by analysts in their covered stocks. Seems a bit harsh, don't you think?
Stuart |
