This week the Financial Industry Regulatory Authority (FINRA), which oversees brokers fined Milwaukee based brokerage firm Robert W. Baird & Co. $150,000 and censured the firm for failing to disclose a conflict of interest arising from the interview where there was substantial likelihood that a reasonable investor would have considered the conflict important to his or her investment decision. In a consent decree, Baird neither admitted nor denied the charges.
Here’s the story: Six years ago, the CEO of a company being followed by a research analyst at Robert W. Baird, a broker, asked the professional if he or she would like to come in for a job interview with the company’s chief and its chief financial officer. The interview came off favorably.
The meeting escalated into a conflict of interest that drew the attention of FINRA when the CEO told senior Baird management about the interview; that the chances were good it could lead to the analyst jumping ship for the company he or she was writing on and asked Baird if the firm had any objections. When the analyst told management at his brokerage about the interview, he was told he could still write about the company he was interviewing at and following, but try to avoid learning about any material, non-public information.