Misguided gumshoes chasing phantom crimes

Traders gossip with clients? Send in the Feds!

The Globe’s story about the suspension of four TD Securities employees will send a chiver down the spines of thousands of brokerage firm staffers this morning. To think that discussing a “market rumour” with a client is worthy of note, let alone investigation. Brokerage staff, whether they be retail or institutional, spend countless hours each day on the telephone with clients. If gossiping is banned, there’ll be little to talk about, other than Sidney Crosby’s prowess in last night’s hockey game or the pros and cons of building a tunnel to the Toronto City Centre Airport.

As themes go, this recent investigation follows the SEC’s inquiries about SAC Capital and the very public accusations that hedge funds paid for negative research reports, knowing that the targeted stock in question would plummet following the public release of the analysis. Cover your short, pocket the winnings, and drive on to the next. But, as themes go, passing along a rumour about XYZ company is entirely benign. To think it warrants the same attention as the alleged short-selling research strategy is nothing more than window dressing by regulators who want to appear to be cracking down on Wall Street in the wake of their obvious failures on Madoff, Bear Stears and Lehman.

As reported, this is much ado about nothing. I hope that TD CEO Ed Clark will re-instate them momentarily, assuming all that happened was as harmless and normal as any other day in our financial markets.

MRM