These are the exact words from the handbook: Securities should be placed on a restricted list when a firm has or may have material nonpublic information. The broad distribution of a restricted list often triggers the sort of trading the list was developed to avoid. Therefore, a watch list shown to only the few people responsible for compliance should be used to monitor transactions in specified securities. Is it saying that the firm should NOT widely distribute the restricted list? If not, how are employees supposedly to know what securities are restricted? And what’s the difference between a watch list and restricted list?
This just reminds me how much I hated studying Ethics. Sorry, but I really cant help you with this ezbentley
my understanding is that a watch list is used to monitor trading on nonpublic information within the firm – thus it is not widely distributed because it would become a self fullfilling prof. but what instead is distributed is a restricted list, which prohibits trading on securities for a number of different reasons. in other words, if management were to distribute a list of securities that they have nonpublic information on, they would encourage traders to bet on the securities. instead you can distribute a restricted list firm wide because you disallow insider trading or front running on the securities that are distributed.
The broad distribution of a restricted list often triggers the sort of trading the list was developed to avoid. It sounds like distribution of the restricted list is discouraged by the handbook. Are you saying that the management and the employees see two different copies of “some” lists?
maybe i’m incorrect, i haven’t read on this in a long time, but i think you’re confusing two different lists: a watch list and a restricted list.
Maybe this can help: Quoting from " http://answers.yahoo.com/question/index?qid=20070518235832AAY9hdU " A restricted list isn’t just “restricted stock for employees”. If a brokerage house has a restricted list… that basically says that the financial advisor can not solicit the stock to his clients/family etc. Usually, maybe a big brokerage house is doing an investment banking deal with the company and therefore it would unethical to discuss this company for buying opportunities. Another reason it may be restricted is if there has been a major price movement in the stock, the analyst can put it on the restricted list for a very short period(3-8 days) until he determines what his opinion(Buy, sell, or hold) will be. If it is on the restricted list, it does not mean you (the investor) can not buy this stock, it just means the broker is not supposed to “solicit” the stock. More or less it has to be “your” idea. And if you work at the brokerage firm and put in a buy order on a restricted stock there is usually some paperwork that needs to be signed/manager approval. Watch Lists by brokerage firms are usually an analysts idea for a group of stocks to watch. Meaning, they are usually a buy stock with potential to sell and make money in a 12 month time frame. Morgan Stanley has a very popular “watch list”. The reason they are used: 1. The restricted list is used to mostly protect them(brokerage firms) from any wrong doing. Whether it be on the investment banking side…or an analyst that had a buy on a stock that just went up 15% in a day(and maybe its time to sell now). Its really just a way to protect the firm from any wrong when soliciting stock. 2. Watch Lists are a marketing tool. Something where clients/stock brokers at the firm can look at a group of stocks and get an idea for the near future.(whether buy or sell) Remember, firms make money when you buy and sell.
the watch list will be used by compliance dept to make sure employees are not trading securities on the restricted list… the watch list should only be shown to those who need to see it for privacy reasons…?? this is my thoughts let me know??