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Investing in stock

Post by Anonymous User » Mon Dec 10, 2018 1:43 pm

I know this is probably a stupid question, but are biglaw associates allowed to invest in stock of specific companies?

I used to work in accounting and we were either not allowed to or had to disclose quarterly.

My firm doesn’t have anything written anywhere so I wanted to ask here. I asked a few people in my office but they didn’t know since they only invest in their 401k

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nealric

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Re: Investing in stock

Post by nealric » Mon Dec 10, 2018 2:07 pm

My old firm had a restricted trading list. I would assume most firms that represent public companies do. That said, you are better off just buying a total stock market index fund.

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Re: Investing in stock

Post by LBJ's Hair » Mon Dec 10, 2018 2:08 pm

Firms have their own specific policies, so it depends (although some have essentially a blanket ban) but from a returns perspective, no offense, you're better off indexing. Buy a few ETFs, get a little fixed income exposure, and remember to reallocate when you add to your portfolio.

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Re: Investing in stock

Post by SFSpartan » Mon Dec 10, 2018 2:41 pm

Each firm will have its own specific policies here. At minimum, you probably can't own stock in clients. Some firms have a blanket ban on owning individual stocks (you're really better off in an index fund anyway)

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Re: Investing in stock

Post by shock259 » Mon Dec 10, 2018 4:57 pm

I would get something in writing from your HR person or whatever that there's no policy. That would be pretty abnormal, as most firms have at least some policy. My current firms requires trades to be pre-cleared, other than aggregate investments (IE index funds). So basically everyone just does index funds.

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Re: Investing in stock

Post by Anonymous User » Mon Dec 10, 2018 7:23 pm

On a related note, what about investing in startups? Same? I emailed HR.

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nealric

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Re: Investing in stock

Post by nealric » Tue Dec 11, 2018 9:40 am

Anonymous User wrote:On a related note, what about investing in startups? Same? I emailed HR.
You may be limited in this firm or no firm for at least a few years. I presume you are not an accredited investor yet. But I don't think a Jr. Biglaw associate has any business investing in startups unless there is serious family money in the background.

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Re: Investing in stock

Post by Wipfelder » Tue Dec 11, 2018 11:18 am

nealric wrote:
Anonymous User wrote:On a related note, what about investing in startups? Same? I emailed HR.
You may be limited in this firm or no firm for at least a few years. I presume you are not an accredited investor yet. But I don't think a Jr. Biglaw associate has any business investing in startups unless there is serious family money in the background.
LOL.

You don't have to be an accredited investor in every circumstance, nor do you have to have "serious family money" to be an accredited investor. Investing in start-ups is super risky, but not so "wild" as to say a Jr BL associate has no business doing so under any circumstance, unless they come from a very wealthy family.

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Re: Investing in stock

Post by SFSpartan » Tue Dec 11, 2018 12:28 pm

Wipfelder wrote:
nealric wrote:
Anonymous User wrote:On a related note, what about investing in startups? Same? I emailed HR.
You may be limited in this firm or no firm for at least a few years. I presume you are not an accredited investor yet. But I don't think a Jr. Biglaw associate has any business investing in startups unless there is serious family money in the background.
LOL.

You don't have to be an accredited investor in every circumstance, nor do you have to have "serious family money" to be an accredited investor. Investing in start-ups is super risky, but not so "wild" as to say a Jr BL associate has no business doing so under any circumstance, unless they come from a very wealthy family.
There are a couple issues with this advice. First, while it's technically true that you don't have to be an accredited investor in every circumstance, the disclosure requirements to unaccredited investors in a 506(b) offering are pretty substantive and expensive to comply with. So, most attorneys in the space (myself included) will advise clients not to offer to unaccredteds unless the founders are doing a favor to family/friends/business associates with whom they want to preserve an important relationship.

Also, the easiest way to make money on startups (aside from pure luck) is to invest in a bunch of them and hope 1-3 really pop. That requires having access to a lot of capital and being able to lock that capital up until a liquidity event. It's also helpful to have access to good deal flow, and to be in a position to bring other investors in on good deals so that they'll bring you in later - a biglaw associate really isn't in a position to do those things. Given the shelf life of a BL associate, I tend to agree with nealric here.

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Re: Investing in stock

Post by texas95 » Tue Dec 11, 2018 12:43 pm

SFSpartan wrote:
Wipfelder wrote:
nealric wrote:
Anonymous User wrote:On a related note, what about investing in startups? Same? I emailed HR.
You may be limited in this firm or no firm for at least a few years. I presume you are not an accredited investor yet. But I don't think a Jr. Biglaw associate has any business investing in startups unless there is serious family money in the background.
LOL.

You don't have to be an accredited investor in every circumstance, nor do you have to have "serious family money" to be an accredited investor. Investing in start-ups is super risky, but not so "wild" as to say a Jr BL associate has no business doing so under any circumstance, unless they come from a very wealthy family.
There are a couple issues with this advice. First, while it's technically true that you don't have to be an accredited investor in every circumstance, the disclosure requirements to unaccredited investors in a 506(b) offering are pretty substantive and expensive to comply with. So, most attorneys in the space (myself included) will advise clients not to offer to unaccredteds unless the founders are doing a favor to family/friends/business associates with whom they want to preserve an important relationship.

Also, the easiest way to make money on startups (aside from pure luck) is to invest in a bunch of them and hope 1-3 really pop. That requires having access to a lot of capital and being able to lock that capital up until a liquidity event. It's also helpful to have access to good deal flow, and to be in a position to bring other investors in on good deals so that they'll bring you in later - a biglaw associate really isn't in a position to do those things. Given the shelf life of a BL associate, I tend to agree with nealric here.
Wouldn’t the average 3rd year biglaw associate at a Cravath scale firm qualify as an accredited investor anyway? They would’ve made over $200k for two years in a row, and as I understand it that fulfills the accredited investor requirements.

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Re: Investing in stock

Post by SFSpartan » Tue Dec 11, 2018 12:57 pm

texas95 wrote:
SFSpartan wrote:
Wipfelder wrote:
nealric wrote:
Anonymous User wrote:On a related note, what about investing in startups? Same? I emailed HR.
You may be limited in this firm or no firm for at least a few years. I presume you are not an accredited investor yet. But I don't think a Jr. Biglaw associate has any business investing in startups unless there is serious family money in the background.
LOL.

You don't have to be an accredited investor in every circumstance, nor do you have to have "serious family money" to be an accredited investor. Investing in start-ups is super risky, but not so "wild" as to say a Jr BL associate has no business doing so under any circumstance, unless they come from a very wealthy family.
There are a couple issues with this advice. First, while it's technically true that you don't have to be an accredited investor in every circumstance, the disclosure requirements to unaccredited investors in a 506(b) offering are pretty substantive and expensive to comply with. So, most attorneys in the space (myself included) will advise clients not to offer to unaccredteds unless the founders are doing a favor to family/friends/business associates with whom they want to preserve an important relationship.

Also, the easiest way to make money on startups (aside from pure luck) is to invest in a bunch of them and hope 1-3 really pop. That requires having access to a lot of capital and being able to lock that capital up until a liquidity event. It's also helpful to have access to good deal flow, and to be in a position to bring other investors in on good deals so that they'll bring you in later - a biglaw associate really isn't in a position to do those things. Given the shelf life of a BL associate, I tend to agree with nealric here.
Wouldn’t the average 3rd year biglaw associate at a Cravath scale firm qualify as an accredited investor anyway? They would’ve made over $200k for two years in a row, and as I understand it that fulfills the accredited investor requirements.
I may have missed it, but I don't see where OP said he/she is a 3rd year. But, yeah, presuming they hadn't gotten the talk, an unmarried 3rd year biglaw associate meets the $200k requirement (married associate would need $300k, so that's not a sure thing). That said, I think investing in startups is a pretty objectively bad idea for the average junior to midlaw biglaw associate unless they have substantial family money.

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Re: Investing in stock

Post by texas95 » Tue Dec 11, 2018 1:07 pm

SFSpartan wrote:
texas95 wrote:
SFSpartan wrote:
Wipfelder wrote:
nealric wrote:
Anonymous User wrote:On a related note, what about investing in startups? Same? I emailed HR.
You may be limited in this firm or no firm for at least a few years. I presume you are not an accredited investor yet. But I don't think a Jr. Biglaw associate has any business investing in startups unless there is serious family money in the background.
LOL.

You don't have to be an accredited investor in every circumstance, nor do you have to have "serious family money" to be an accredited investor. Investing in start-ups is super risky, but not so "wild" as to say a Jr BL associate has no business doing so under any circumstance, unless they come from a very wealthy family.
There are a couple issues with this advice. First, while it's technically true that you don't have to be an accredited investor in every circumstance, the disclosure requirements to unaccredited investors in a 506(b) offering are pretty substantive and expensive to comply with. So, most attorneys in the space (myself included) will advise clients not to offer to unaccredteds unless the founders are doing a favor to family/friends/business associates with whom they want to preserve an important relationship.

Also, the easiest way to make money on startups (aside from pure luck) is to invest in a bunch of them and hope 1-3 really pop. That requires having access to a lot of capital and being able to lock that capital up until a liquidity event. It's also helpful to have access to good deal flow, and to be in a position to bring other investors in on good deals so that they'll bring you in later - a biglaw associate really isn't in a position to do those things. Given the shelf life of a BL associate, I tend to agree with nealric here.
Wouldn’t the average 3rd year biglaw associate at a Cravath scale firm qualify as an accredited investor anyway? They would’ve made over $200k for two years in a row, and as I understand it that fulfills the accredited investor requirements.
I may have missed it, but I don't see where OP said he/she is a 3rd year. But, yeah, presuming they hadn't gotten the talk, a 3rd year biglaw associate meets the $200k requirement. That said, I think investing in startups is a pretty objectively bad idea for the average junior to midlaw biglaw associate unless they have substantial family money.
I wasn’t referring specifically to OP (or the other poster asking about startups), was just asking in general. Should’ve made that more clear.

Wipfelder

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Re: Investing in stock

Post by Wipfelder » Tue Dec 11, 2018 1:19 pm

SFSpartan wrote:
Wipfelder wrote:
nealric wrote:
Anonymous User wrote:On a related note, what about investing in startups? Same? I emailed HR.
You may be limited in this firm or no firm for at least a few years. I presume you are not an accredited investor yet. But I don't think a Jr. Biglaw associate has any business investing in startups unless there is serious family money in the background.
LOL.

You don't have to be an accredited investor in every circumstance, nor do you have to have "serious family money" to be an accredited investor. Investing in start-ups is super risky, but not so "wild" as to say a Jr BL associate has no business doing so under any circumstance, unless they come from a very wealthy family.
There are a couple issues with this advice. First, while it's technically true that you don't have to be an accredited investor in every circumstance, the disclosure requirements to unaccredited investors in a 506(b) offering are pretty substantive and expensive to comply with. So, most attorneys in the space (myself included) will advise clients not to offer to unaccredteds unless the founders are doing a favor to family/friends/business associates with whom they want to preserve an important relationship.

Also, the easiest way to make money on startups (aside from pure luck) is to invest in a bunch of them and hope 1-3 really pop. That requires having access to a lot of capital and being able to lock that capital up until a liquidity event. It's also helpful to have access to good deal flow, and to be in a position to bring other investors in on good deals so that they'll bring you in later - a biglaw associate really isn't in a position to do those things. Given the shelf life of a BL associate, I tend to agree with nealric here.
Are those 506(b) requirements applied to a "sophisticated" investor as well? In my experience (probably not as deep or broad as yours) the "due dilligence" to make sure an investor is accredited is a fairly easy, and not well-monitored, hoop to jump through. The separate "sophisticated" qualifier can be satisfied, if they are not an AC, if they have access to enough information to make an informed choice about their investment. In my experience, this creates a pretty fast and loose barrier to investment.

I don't disagree that investing in start-ups is a bad idea for most BL associates, but the original post I commented on came off far to strong, and kind of uber-uncreative-Marxist, i.e. the ONLY way someone who was a junior in biglaw could invest in start-ups was if they had wealthy parents.

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nealric

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Re: Investing in stock

Post by nealric » Tue Dec 11, 2018 2:05 pm

Wipfelder wrote:
nealric wrote:
Anonymous User wrote:On a related note, what about investing in startups? Same? I emailed HR.
You may be limited in this firm or no firm for at least a few years. I presume you are not an accredited investor yet. But I don't think a Jr. Biglaw associate has any business investing in startups unless there is serious family money in the background.
LOL.

You don't have to be an accredited investor in every circumstance, nor do you have to have "serious family money" to be an accredited investor. Investing in start-ups is super risky, but not so "wild" as to say a Jr BL associate has no business doing so under any circumstance, unless they come from a very wealthy family.
I never said it was an absolute barrier, but it may be an issue. Yes, a BL associate will quickly hit accredited investor status, but I was assuming the question was coming form a brand new associate.

I do think most BL associates have no business investing in just about any start up. Most people who are seriously into that space understand that the majority of their investments will go completely bust, but expect a small number of big winners to make up the difference. That's a silly strategy for someone with next to no capital (and likely in significant debt). The whole reason for the creation of the accredited investor rules was that they were intended to protect investors who really didn't have money to burn. As a brand new BL associate, you probably don't have money to burn even though your salary might put you past the threshold after a few years. In fact, there's been a lot of talk about increasing the accredited investor threshold, as the current numbers haven't kept up with inflation (they date back to the early 80s).

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Re: Investing in stock

Post by SFSpartan » Tue Dec 11, 2018 3:12 pm

Wipfelder wrote:
SFSpartan wrote:
Wipfelder wrote:
nealric wrote:
Anonymous User wrote:On a related note, what about investing in startups? Same? I emailed HR.
You may be limited in this firm or no firm for at least a few years. I presume you are not an accredited investor yet. But I don't think a Jr. Biglaw associate has any business investing in startups unless there is serious family money in the background.
LOL.

You don't have to be an accredited investor in every circumstance, nor do you have to have "serious family money" to be an accredited investor. Investing in start-ups is super risky, but not so "wild" as to say a Jr BL associate has no business doing so under any circumstance, unless they come from a very wealthy family.
There are a couple issues with this advice. First, while it's technically true that you don't have to be an accredited investor in every circumstance, the disclosure requirements to unaccredited investors in a 506(b) offering are pretty substantive and expensive to comply with. So, most attorneys in the space (myself included) will advise clients not to offer to unaccredteds unless the founders are doing a favor to family/friends/business associates with whom they want to preserve an important relationship.

Also, the easiest way to make money on startups (aside from pure luck) is to invest in a bunch of them and hope 1-3 really pop. That requires having access to a lot of capital and being able to lock that capital up until a liquidity event. It's also helpful to have access to good deal flow, and to be in a position to bring other investors in on good deals so that they'll bring you in later - a biglaw associate really isn't in a position to do those things. Given the shelf life of a BL associate, I tend to agree with nealric here.
Are those 506(b) requirements applied to a "sophisticated" investor as well? In my experience (probably not as deep or broad as yours) the "due dilligence" to make sure an investor is accredited is a fairly easy, and not well-monitored, hoop to jump through. The separate "sophisticated" qualifier can be satisfied, if they are not an AC, if they have access to enough information to make an informed choice about their investment. In my experience, this creates a pretty fast and loose barrier to investment.

I don't disagree that investing in start-ups is a bad idea for most BL associates, but the original post I commented on came off far to strong, and kind of uber-uncreative-Marxist, i.e. the ONLY way someone who was a junior in biglaw could invest in start-ups was if they had wealthy parents.
Hear your point re: the general tone of the original post but that's not what I said. I will stick by what I said though - it really doesn't make sense for a BL associate to invest in startups unless they have family money (or independent wealth).

Also, agree that 506(b) isn't well monitored, but a Company doing a 506(b) is supposed to provide all unaccrediteds with substantive disclosures similar to those in Reg. A offerings or registered offerings. The sophistication requirement is a separate thing - to participate in a 506(b) offering, unaccredited investors must be sophisticated.

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