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Corporate Conflicts

Buy, Write, then Sell for columnist.

Corporate Conflicts of Interest at MarketWatch: Thom Calandra, a former columnist for, has agreed to pay more than $540,000 to settle SEC's civil fraud charges for using his news column to pump up the prices of certain stocks and then profiting by secretly selling them.

Calandra was accused of buying shares of stock in small, thinly-traded companies, writing articles for recommending the companies. Calandra then sold his shares when the stock price went up shortly after his article was published. Calandra allegedly profited on 23 stocks that he covered.

According to the SEC, Calandra also failed to tell his readers that he was able to purchase shares of stock at a deep discount directly from a stock promoter associated with 2 mining companies that Calandra favorably profiled in his newsletter.

While this may be viewed as some as a personal matter, MarketWatch should be thinking about beefing up their insider trading policies. As a provider of financial news, MarketWatch's reporters and columnists can influence markets with the stories they write and even learn of material information before it is in public domain.

To minimize conflicts of interest, MarketWatch should have in place rules prohibiting reporters and columnists from directly owning stocks in companies that they regularly write about.

From my own experience with the financial services industry, all employees were required to use the services of 2 brokerage firms. A full service brokerage house and a discount brokerage house.

All buying and selling of any stock had to be cleared with the legal compliance officer who tracked all inquiries on a computerized database that would be cross referenced with the databases from the brokerage firms. If approval was given to buy or sell a stock, the employee had a 2 day window to execute the transaction. The list of exempt stocks was never distributed and restricted to the legal department to control investment speculation should the list be made public.

If a trade were made without prior approval, the employee would be forced to reverse the trade immediately at their expense. Any "profits" would be returned and the employee reported to senior management.

Equity analysts would also be subject to management review of their brokerage accounts and trading activity on a regular basis.

I personally reviewed monthly activity for my division and periodically questioned employees about certain activity in their accounts. (All activity was compliant).

Since the SEC alleges 23 incidents, I have to question the management review and internal controls at MarketWatch.

2005 Nelson Chin.
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Samples of Written Policies:

Conflicts of Interest v1
Conflicts of Interest v2
Conflicts of Interest v3

Audit Committee v1


Sarbanes-Oxley Act of 2002

Final Arthur Andersen Alumni Letter

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