I cannot own stocks on Robinhood due to company's independence policy?

IBM / QA joTX86
Jul 20 37 Comments

My spouse is evaluating an offer from a Big Four accounting firm as a staff member for the assurance department. When reading the fine print of the offer we noticed that they have an independence policy requirement which states that immediate family member(including husband or wife) cannot own stocks of certain companies(well, actually a lot of blue chip companies that I'm particularly interested in). Now, I'm pretty active on Robinhood buying and selling these stocks. If my spouse accepts the offer, does that mean I can't own any of these stocks? Is there a limit up-to which I can own these stocks? What about my index fund investments, these funds invest in companies that I don't get to choose, so I cannot own index funds either? Or, am I missing something here? Interested in hearing if you have any thoughts regarding this. Thank you

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TOP 37 Comments
  • Oath Atinlay2
    Conflicts of interest are a thing
    Jul 20 3
    • IBM / QA joTX86
      OP
      @Atinlay2 I see. thanks, my understanding was there is some limit up-to which I can own or even my spouse's position in the company matters, maybe I'm wrong.
      Jul 20
    • Oath Atinlay2
      No limit. Zero. She will have access to more data than the public has.
      Jul 20
    • IBM / QA joTX86
      OP
      Ok @Atinlay2, got it.
      Jul 20
  • Optum har849
    My wife works for a Big 4 as well and the independence policy (for her at least, in advisory) is limited to companies that the firm has an audit relationship with. So if her firm provides tax services, you are free to invest.

    There are also restrictions based on office location and the level at which she would be joining. Partners are more restricted.

    There are internal systems wherein you need to pre-clear the stock you intend to buy. In our case, they get a feed from all our brokerage accounts that automatically lets the firm know when I buy a security. Attestations are required every 6 months or so and any new financial relationship needs to be disclosed.
    Jul 20 5
    • IBM / QA joTX86
      OP
      Hi @har849, this is pretty elaborate, thank you. my spouse is going to be in assurance(I've updated my original post to reflect this) department. Oh I see, we don't have any information regarding the location limitations, yet.

      need some clarity of the following statement:
      > they get a feed from all our brokerage accounts that automatically lets the firm know when I buy a security

      how does this work if you are investing in Vanguard Index funds or
      iShares ETFs or any other mutual funds? I don't think there's a fund which is free from all these '"blacklisted" companies by my spouse's employer. that means I cannot invest in index funds also, that would s*ck :-(
      Jul 20
    • Optum har849
      I don’t think you will have much trouble if you are buying broad index funds. Mutual funds that are more specialized are probably going to get additional scrutiny. In our case the only mutual funds we hold are through our 401ks and IRAs and those are not generally a problem since the selection of those is mainly controlled by the employer.

      That said, her 401k itself sucks pretty bad and has lagged behind mine by over 100k over the past 10-15 years due to the absolutely pathetic selection of funds available. They do make it up in some ways by contributing an additional 5-6% to a separate account (which invests in the same set of funds)

      If you are an active stock trader, this will put a huge crimp in your style for sure and needs to be evaluated carefully.

      In some cases people are asked to sell stocks they have held thereby creating issues if you manage your income to optimize for taxes. Hasn’t happened to be me because we live in Minnesota and they audit very few firms locally. If we ever move to the east coast or west coast this may become a factor since the local office employee restrictions would start to apply. Same if she makes partner (but that’s a problem I am willing to live with :))
      Jul 23
    • IBM / QA joTX86
      OP
      Good insight. I was thinking the same about 401k, the one my employer provides, I don't think that did good anyways, so I'm not too worried about that. I'm not an active investor yet, was starting to be and when I came across policies like these I was surprised. Now that I've seen a lot of replies here and elsewhere on the internet that it's the norm, we either have to live with it or ask my spouse to find a different opportunity.

      I see, so if the company by spouse _may_ audit is not local, then I'm okay holding stocks of that company or is the local clause in addition to the independence policy?
      Jul 24
    • Optum har849
      Think of it this way - is your wife in the course of her day to day work likely to come across any information that is not public knowledge that she could use to her advantage to gain unfairly? If the answer for given stock/mutual fund is yes, then she would be restricted.

      For example - If the Idaho office is auditing some insurance company and you are based in the Huntsville, AL office working in the advisory practice targeted to manufacturing, then you are unlikely to be restricted from trading in that ID company since the odds of you coming across anything related to that company is extremely low. OTOH, if you are based in New York City and your firm is engaged with JP Morgan or any of the tons of financial companies, even if you are focused in a different practice and industry, there is always a chance that you could come across something.

      Hope this helps.
      Jul 24
    • IBM / QA joTX86
      OP
      Ah, I see. Thanks, that's clear to me now.
      Jul 24
  • Deloitte uAag27
    Everybody at Deloitte is subject to these trading controls, with different rule sets depending on which kind of service you perform. I am in consulting so the rule set is not as stringent as in audit for example, and typically I am able to clear my purchases in less than a minute by inputting what I want to buy and answering some questions about my involvement with that client. You must trade with brokers that offer integration with Deloitte’s tracking and trading system, Robinhood is not one of them, there is large list with others. Also you cannot use managed investments as in someone purchasing on your behalf because they may trade things you are not allowed to buy/sell. Funds can dicey because they may hold stock of restricted entities, but you can clear the trade of funds the same way you clear trade of stocks.
    You will need to get used to consulting your wife about being able to trade the stocks you want to buy/sell.
    The reason I say sell is that you may have purchased a stock before that company becomes a restricted entity to your wife, so you may have to either sell it off, clear it, or hold it for as long as it is restricted to your wife, as you could benefit from insider info and make substantial gains with that.
    I hope this helps.
    Jul 21 1
    • IBM / QA joTX86
      OP
      Thanks for the suggestion. I read few more documents and like you mentioned there are "whitelisted" brokers through whom I can invest money in stocks. Spouse's company will have access to audit this account. Will probably do mostly index funds and then research and invest on ones I'm allowed to.
      Jul 25
  • Facebook / Mgmt vjuiu
    Seems pretty clear cut especially if she is an auditor. They get all access to all of the financials before the reporting goes live.
    Jul 20 1
    • IBM / QA joTX86
      OP
      @vjuiu Ok, thanks. Yes, she's going to be an auditor. Maybe that's why they think i will get benefit in evaluating stocks before information does public, got it.
      Jul 20
  • Two Sigma / Eng mgre
    Get a divorce, problem solved.
    Jul 20 0
  • Bank of America / Data
    accountfee

    Bank of America Data

    PRE
    The Walt Disney Company
    accountfeemore
    Index funds are fine. Mutual funds are fine.

    I'm in an even worse situation - cannot touch any equities at all because I have access to data on the entire economy that other people don't. 😭😭😭
    Jul 20 12
    • Microsoft
      Tier 1

      Microsoft

      BIO
      #1 in Prestige
      Tier 1more
      I’m not sure how this would be any different from Google trading based on the usage of their search engine.
      Jul 21
    • Bank of America / Data
      accountfee

      Bank of America Data

      PRE
      The Walt Disney Company
      accountfeemore
      Bank has better data. 🤷‍♀️

      I would also argue that Google and Facebook employees with that data access should also be subject to the same policy I am.
      Jul 21
    • Microsoft
      Tier 1

      Microsoft

      BIO
      #1 in Prestige
      Tier 1more
      People will tell their search engine things they wouldn’t even tell their spouse, their accountant, their attorney, their priest, or their doctor.

      A search engine is an extension of self.

      How does a bank have better data?
      Jul 21
    • Bank of America / Data
      accountfee

      Bank of America Data

      PRE
      The Walt Disney Company
      accountfeemore
      Suppose, hypothetically, that Albertson's was a publicly traded company and they banked with Bank of America. Bank of America now knows what their earnings report looks like before it makes it to the public. Suppose there is a discrepancy between actual earnings and forecasted earnings - well, there would be quite a bit of money to be made speculating there.
      Jul 22
    • Microsoft
      Tier 1

      Microsoft

      BIO
      #1 in Prestige
      Tier 1more
      Betting on Albertsons earnings being higher than expected is always a winning trade.

      But that’s an interesting point you bring up. That seems more to do with your duty to your specific customers rather than overall statistics.
      Jul 22
  • Facebook Iivq74
    Yup as a former big 4 auditor fucking run away from that shit
    Jul 20 2
    • IBM / QA joTX86
      OP
      haha @livq74, good suggestion. I need to tell my spouse to start looking at other offers
      Jul 20
    • Facebook Iivq74
      No joke...you should create a poll to see the consensus
      Jul 20
  • Deloitte xClw02
    this is indeed true. You have to comply even if you're not in the audit division
    Jul 22 1
    • IBM / QA joTX86
      OP
      Got it, thank you. That's been the general advise here.
      Jul 25
  • Microsoft
    Tier 1

    Microsoft

    BIO
    #1 in Prestige
    Tier 1more
    You should be able to buy and sell index funds.

    Serious question though: how much more money would she make on this job vs you from trading stocks?

    Does she like that job?

    Perhaps she should take it and you just put your money in index funds and/or trade other stocks.
    Jul 20 1
    • IBM / QA joTX86
      OP
      Right now, the money my spouse will make is surely going to help us than me trading stocks. I was too late to the game and was just getting started, so not really a big loss for me in terms of not being allowed to trade. Spouse is not in s/w so options are limited. Yup index funds all in! haha, thanks for the advice.
      Jul 25
  • Citibank / Data
    noisyedge

    Citibank Data

    PRE
    Think Big Analytics
    noisyedgemore
    The firm may make her a monitored employee and let you trade through whatever brokerages they have a relationship with that will share your activity with them for compliance. In some cases trades may require approvals from her company's compliance team which delays trades typically by several days, but rarely flat out rejects them.
    Jul 20 1
    • Microsoft
      Tier 1

      Microsoft

      BIO
      #1 in Prestige
      Tier 1more
      ...that completely defeats the purpose of trading on Robinhood.

      It’s a cheap way to learn day trading with the real psychological effects that are missing from paper trading.
      Jul 20