3 ms·

Yeah, I didn't see anything about SEC in there. That page also quotes a California Superior Court opinion that found the term was a "piece of legal flotsam whi

Yeah, I didn't see anything about SEC in there. That page also quotes a California Superior Court opinion that found the term was a "piece of legal flotsam which should be emphatically abandoned". The same opinion also found: > The origin of the use of "Chinese Wall" in the context of confidentiality is unclear. Evidently, the term was casually coined in some appellate opinion, then picked up and used without question or explanation by courts and commentators. Can you point to an SEC regulation, or other law, that refers to a Chinese Wall? Like, is there a more specific, technical definition? Wikipedia refers to Chinese wall departments in companies; do you know where to find more information about them? Perhaps links to their enforcement and compliance documents?

azernik 10y ago
You're taking that quote WAY out of context. That was an ethnic-Chinese judge criticizing the specific phrase, and preferring that "ethics wall" be used instead. 'He maintained that the "continued use of the term would be insensitive to the ethnic identity of the many persons of Chinese descent"' The article mentions, but does not specifically name, regulations implemented after the 1929 stock crash; it also specifically names Title V of the Sarbanes-Oxley Act of 2002. The SEC is responsible for the enforcing the provisions of the latter.
- jsprogrammer 10y ago
  The damning part is this: > then picked up and used without question or explanation by courts and commentators This indicates (and was also said) that the term has no lawful basis; it is industry cargo cultism that had been copied around without basis for years.
  - azernik 10y ago
    It is an informal term that refers to very real regulatory requirements.
    - jsprogrammer 10y ago
      I'm having trouble visualizing such a wall. Is a wall referenced? Or is just a metaphor for some vague rules that may or may not be followed? Is there a turnkey fire/Chinese wall product on the market?
      - princeb 10y ago
        it works just like a industrial grade router firewall - the router is connected to a gas main, which directs a stream of gas over the back the of router where the rj45s go into, and a flame continuously burns any nasty hackers attempting to hack into your system. home router systems don't have such a feature. edit: matt levine used to work at goldman and he posted a piece that has a description of how goldman's multiple chinese wall systems works: > Nor will [the research analysts] get any hearty back-slaps and high-fives from the bankers, because any banker who walked onto a research floor would be vaporized by powerful lasers long before he could raise his hand for a high-five. > Remember, bankers can't just call up analysts. Their phones would explode. https://www.bloomberg.com/view/articles/2016-05-19/goldman-picked-a-good-time-to-like-tesla-s-stock https://www.bloomberg.com/view/articles/2016-05-19/goldman-p...
        jsprogrammer 10y ago
        OK, so what I gathered from that article is that it is super illegal for researchers to talk to bankers. So much so that they cannot call or email each other over official company channels, but if they do want to talk, they can just step outside the office and use their cell phones. The wall sounds as effective as LIBOR's blind auctions.
        princeb 10y ago
        yup. obviously there are limitations. how do you even plan to 100% restrict that information? i guess you can lock up the research analysts and bankers in monitored cells after work...
MagnumOpus 10y ago
Generally, the rules and regulations that apply to the relationship between the Research and Investment Banking departments of a firm include: - FINRA1 Conduct Rule 2711; - NYSE Rule 472; - SEC Regulation AC (Analyst Certification); - SEC Rules 137, 138, and 139 under the Securities Act of 1933. The Global Settlement of 2002 The Global Research Analyst Settlement (“Global Settlement”) is an enforcement agreement first announced in December 2002 and finalized on April 28, 2003, among the SEC, NASD (now FINRA), the NYSE, the New York State Attorney General and ten of the then-largest investment banking firms in the United States (the “Settling Firms”, the big 8 US banks plus UBS and Credit Suisse). The Global Settlement addressed issues related to conflicts of interest between the Research and Investment Banking departments these firms that became apparent during the “dot com” boom and then bust of the late 1990s and early 2000s. As part of the Global Settlement, the Settling Firms agreed to several rules designed to prevent abuse stemming from pressure by investment bankers research analysts to provide favorable coverage specific issuers or securities. The Settling Firms were required to separate their Investment Banking and Research departments from each other both physically and with information "firewalls". Additionally, the budget allocation for Research was to be independent of Investment Banking. Research analysts were also prohibited from attending pitches and road shows with investment bankers during the advertising and promotion of initial public offerings (IPOs). Finally, research analysts’ previously issued ratings about issuers had to be disclosed and made available. In addition to these regulatory actions, each Settling Firm was enjoined from violating the statutes and rules that it was alleged to have violated. The Settling Firms were also required to pay fines to their investors, fund investor education and pay for independent third-party market research. The total fine paid by the Settling Firms was approximately $1.435 billion, of which $387.5 million was restitution to harmed investors. The Global Settlement was amended in March 2010. Sarbanes-Oxley The Sarbanes-Oxley Act of 2002 required the SEC to address conflicts of interest involving research analysts and investment bankers. In response to Sarbanes-Oxley, the NASD and the NYSE established rules and safeguards to separate research analysts from the review, pressure and oversight of investment banking personnel. These rules are intended to ensure the integrity of research, and to protect investors from being misled as a result of a failure to disclose potential conflicts of interest.

azernik 10y ago

You're taking that quote WAY out of context. That was an ethnic-Chinese judge criticizing the specific phrase, and preferring that "ethics wall" be used instead. 'He maintained that the "continued use of the term would be insensitive to the ethnic identity of the many persons of Chinese descent"' The article mentions, but does not specifically name, regulations implemented after the 1929 stock crash; it also specifically names Title V of the Sarbanes-Oxley Act of 2002. The SEC is responsible for the enforcing the provisions of the latter.

jsprogrammer 10y ago
The damning part is this: > then picked up and used without question or explanation by courts and commentators This indicates (and was also said) that the term has no lawful basis; it is industry cargo cultism that had been copied around without basis for years.
- azernik 10y ago
  It is an informal term that refers to very real regulatory requirements.
  - jsprogrammer 10y ago
    I'm having trouble visualizing such a wall. Is a wall referenced? Or is just a metaphor for some vague rules that may or may not be followed? Is there a turnkey fire/Chinese wall product on the market?
    - princeb 10y ago
      it works just like a industrial grade router firewall - the router is connected to a gas main, which directs a stream of gas over the back the of router where the rj45s go into, and a flame continuously burns any nasty hackers attempting to hack into your system. home router systems don't have such a feature. edit: matt levine used to work at goldman and he posted a piece that has a description of how goldman's multiple chinese wall systems works: > Nor will [the research analysts] get any hearty back-slaps and high-fives from the bankers, because any banker who walked onto a research floor would be vaporized by powerful lasers long before he could raise his hand for a high-five. > Remember, bankers can't just call up analysts. Their phones would explode. https://www.bloomberg.com/view/articles/2016-05-19/goldman-picked-a-good-time-to-like-tesla-s-stock https://www.bloomberg.com/view/articles/2016-05-19/goldman-p...
      - jsprogrammer 10y ago
        OK, so what I gathered from that article is that it is super illegal for researchers to talk to bankers. So much so that they cannot call or email each other over official company channels, but if they do want to talk, they can just step outside the office and use their cell phones. The wall sounds as effective as LIBOR's blind auctions.
        princeb 10y ago
        yup. obviously there are limitations. how do you even plan to 100% restrict that information? i guess you can lock up the research analysts and bankers in monitored cells after work...

MagnumOpus 10y ago

Generally, the rules and regulations that apply to the relationship between the Research and Investment Banking departments of a firm include: - FINRA1 Conduct Rule 2711; - NYSE Rule 472; - SEC Regulation AC (Analyst Certification); - SEC Rules 137, 138, and 139 under the Securities Act of 1933. The Global Settlement of 2002 The Global Research Analyst Settlement (“Global Settlement”) is an enforcement agreement first announced in December 2002 and finalized on April 28, 2003, among the SEC, NASD (now FINRA), the NYSE, the New York State Attorney General and ten of the then-largest investment banking firms in the United States (the “Settling Firms”, the big 8 US banks plus UBS and Credit Suisse). The Global Settlement addressed issues related to conflicts of interest between the Research and Investment Banking departments these firms that became apparent during the “dot com” boom and then bust of the late 1990s and early 2000s. As part of the Global Settlement, the Settling Firms agreed to several rules designed to prevent abuse stemming from pressure by investment bankers research analysts to provide favorable coverage specific issuers or securities. The Settling Firms were required to separate their Investment Banking and Research departments from each other both physically and with information "firewalls". Additionally, the budget allocation for Research was to be independent of Investment Banking. Research analysts were also prohibited from attending pitches and road shows with investment bankers during the advertising and promotion of initial public offerings (IPOs). Finally, research analysts’ previously issued ratings about issuers had to be disclosed and made available. In addition to these regulatory actions, each Settling Firm was enjoined from violating the statutes and rules that it was alleged to have violated. The Settling Firms were also required to pay fines to their investors, fund investor education and pay for independent third-party market research. The total fine paid by the Settling Firms was approximately $1.435 billion, of which $387.5 million was restitution to harmed investors. The Global Settlement was amended in March 2010. Sarbanes-Oxley The Sarbanes-Oxley Act of 2002 required the SEC to address conflicts of interest involving research analysts and investment bankers. In response to Sarbanes-Oxley, the NASD and the NYSE established rules and safeguards to separate research analysts from the review, pressure and oversight of investment banking personnel. These rules are intended to ensure the integrity of research, and to protect investors from being misled as a result of a failure to disclose potential conflicts of interest.