5 ms·

I highly doubt that there’s any impropriety going on besides the lack of disclosure. Investment banks have been dealing with conflicts like this for a long time

by mruts 8y ago

I highly doubt that there’s any impropriety going on besides the lack of disclosure. Investment banks have been dealing with conflicts like this for a long time and the market has never cared.

jonahb 8y ago
I wonder if you read the article. Banks keep research and banking separate. At McKinsey, the heads of several practice areas are on the hedge fund's board. Not to mention that if your standard for impropriety is the investment bank, you're lost already.
- mruts 8y ago
  I mean, do you think it's really that likely that the portfolio manager of the hedge fund is in collusion with the board? That would be highly unusual, and I seriously doubt McKinsey would risk such collusion. I know people here don't think highly of the financial services industry, but let's talk about self interest. The fines from the SEC if there were collusion would be massive, this would be one of the biggest cases of insider trading in the past decade. I know people from McKinsey, and while I don't know about top management, I believe that they are a reputable firm and wouldn't touch anything like this with a ten-foot pole.
bob_theslob646 8y ago
There is something known as a "Chinese wall" that prevents that in banking. I am not sure if there is one in consulting. > A Chinese wall is an ethical barrier that prevents communication between members of an organization that might lead to conflicts of interest. For example, a Chinese wall could exist between departments where the exchange of information could unfairly influence trades. The "wall" is figuratively erected to safeguard insider information and protect private data that could create negative implications and legal consequences if improperly shared. BREAKING DOWN Chinese Wall > Protecting client data and confidential information is critical to any business but is especially important to companies with diversified services, such as insurance companies, banks, and other financial services firms. > The Gramm-Leach-Bliley Act (GLBA) of 1999 repealed the Glass-Steagall Act that prohibited banks, insurance companies, and financial services companies from acting as combined firms, such as banks offering insurance products. The Gramm-Leach-Bliley Act resulted in a surge of mergers and increased diversification of services, as well as an increase in fears and public scrutiny. One concern was the protection and sharing of confidential information and personal consumer data with those of contrary interests. In response to growing concerns, many companies adopted the Chinese Wall concept. (https://www.investopedia.com/terms/c/chinesewall.asp https://www.investopedia.com/terms/c/chinesewall.asp)
- mruts 8y ago
  That's a good point. And you're right, I don't believe there is anything like a Chinese Wall in consulting. But I still don't think that they would risk their reputation on very risky collusion. If there were evidence that there was insider trading on behalf of the hedge fund, it would probably result in one of the largest SEC fine in recent years. It would be a massive blow to their reputation. I tend to believe (maybe naively) that firms act in their own best interest and that McKinsey wouldn't dare do something as egregious as collude with their hedge fund. I know I probably have more faith in the financial services industry than most of HN, but McKinsey is a reputable firm with good people and I don't believe that in a million years (will that might be an overstatement) they would do anything like what the NYT is suggesting.

by mruts 8y ago

I highly doubt that there’s any impropriety going on besides the lack of disclosure. Investment banks have been dealing with conflicts like this for a long time and the market has never cared.

jonahb 8y ago

I wonder if you read the article. Banks keep research and banking separate. At McKinsey, the heads of several practice areas are on the hedge fund's board. Not to mention that if your standard for impropriety is the investment bank, you're lost already.

mruts 8y ago
I mean, do you think it's really that likely that the portfolio manager of the hedge fund is in collusion with the board? That would be highly unusual, and I seriously doubt McKinsey would risk such collusion. I know people here don't think highly of the financial services industry, but let's talk about self interest. The fines from the SEC if there were collusion would be massive, this would be one of the biggest cases of insider trading in the past decade. I know people from McKinsey, and while I don't know about top management, I believe that they are a reputable firm and wouldn't touch anything like this with a ten-foot pole.

bob_theslob646 8y ago

There is something known as a "Chinese wall" that prevents that in banking. I am not sure if there is one in consulting. > A Chinese wall is an ethical barrier that prevents communication between members of an organization that might lead to conflicts of interest. For example, a Chinese wall could exist between departments where the exchange of information could unfairly influence trades. The "wall" is figuratively erected to safeguard insider information and protect private data that could create negative implications and legal consequences if improperly shared. BREAKING DOWN Chinese Wall > Protecting client data and confidential information is critical to any business but is especially important to companies with diversified services, such as insurance companies, banks, and other financial services firms. > The Gramm-Leach-Bliley Act (GLBA) of 1999 repealed the Glass-Steagall Act that prohibited banks, insurance companies, and financial services companies from acting as combined firms, such as banks offering insurance products. The Gramm-Leach-Bliley Act resulted in a surge of mergers and increased diversification of services, as well as an increase in fears and public scrutiny. One concern was the protection and sharing of confidential information and personal consumer data with those of contrary interests. In response to growing concerns, many companies adopted the Chinese Wall concept. (https://www.investopedia.com/terms/c/chinesewall.asp https://www.investopedia.com/terms/c/chinesewall.asp)

mruts 8y ago
That's a good point. And you're right, I don't believe there is anything like a Chinese Wall in consulting. But I still don't think that they would risk their reputation on very risky collusion. If there were evidence that there was insider trading on behalf of the hedge fund, it would probably result in one of the largest SEC fine in recent years. It would be a massive blow to their reputation. I tend to believe (maybe naively) that firms act in their own best interest and that McKinsey wouldn't dare do something as egregious as collude with their hedge fund. I know I probably have more faith in the financial services industry than most of HN, but McKinsey is a reputable firm with good people and I don't believe that in a million years (will that might be an overstatement) they would do anything like what the NYT is suggesting.