Ethics: Conflict of interest? Translating annual report of company I own stocks in...
Thread poster: Jalapeno
Jalapeno
Local time: 03:07
English to German
Jan 20, 2006

Hello everybody,

I have an interesting situation here and would like to hear your thoughts on it.

I've been approached by a regular client of mine (an agency) about a possible job. They asked me if I had time next week to translate some (maybe all) of the annual report of a German Aktiengesellschaft, i.e. a stock corporation that is listed on the public stock exchange. I accepted the job, and the first file is due to arrive on Monday.

Only now, a few hours after accepting the job, I realized that I'm actually a shareholder of the company in question. I have a very small number of their stocks in my portfolio. The value is really negligible, it's only about EUR 200 or so.

Now, my problem is this. Do you think it would be unethical for me to translate the annual report of a company I own stock in? After all, that would provide me with insider information, since I would have access to information that the general public will only see in few weeks' time.

My take on this is that as long as I don't act on the information, I'm fine. However, I'm thinking of sending the agency an e-mail explaining the situation and suggesting they find somebody else to do the translation if they are uncomfortable with the situation.

What do you think? Has anyone ever been in a similar situation?


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xxxdf49f
France
Local time: 03:07
no conflict if Jan 20, 2006

Hi
this is my own position:
There is no conflict of interest provided you remember two rules:
1) translators & interpreters are legally bound to secrecy (at least in our west European countries - don't know elsewhere)
2) insider trading is a crime punished by law (ditto for the countries) and everybody must comply with the law, translators and citizens alike.
As an interpreter, I sometimes attend board meetings of companies in which I also own a couple of shares and strategic decisions are made - I just don't run out during my break and call my banker to buy or sell my stock!
If you abide by these 2 rules and don't act on the insider information you learn by translating the documents, then where would be the problem?

df


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xxxsarahl
Local time: 18:07
English to French
+ ...
How confidential is this? Jan 20, 2006

As far as I know, a company's annual report is available to all shareholders. Of course, you might have the information a couple days before the general public, but I don't think there's a real confidentiality issue here. I can certainly think of more sensitive jobs.

If this really bothers you, I suggest you have the agency ask the client so you know exactly where you're standing.

Luck,

Sarah

[Edited at 2006-01-21 14:02]


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Ralf Lemster  Identity Verified
Germany
Local time: 03:07
English to German
+ ...
No problem as long as you don't use information Jan 21, 2006

Hi Jalapeno,
First of all, may I suggest to take a look at the German Securities Trading Act, which is applicable in this situation.

The fact that you're holding securities which may be classified as insider securities (section 12 WpHG) is not a problem per se, as long as you don't use any inside information you may have access to in the course of the project.

Personally, I try to avoid any situation where someone would start asking questions, so I don't hold equities in the companies I work for. (I hold a put warrant on one of my major clients' shares, to offset the exposure to that client, but I don't work on their financial data, so that isn't a problem.)

sarahl wrote:

As far as I know, a company's annual report is available to all taxholders. Of course, you might have the information a couple days before the general public, but I don't think there's a real confidentiality issue here. I can certainly think of more sensitive jobs.

The annual report is indeed published to all shareholders, but translators usually get access to information which may constitute inside information ("any specific information about circumstances which are not public knowledge relating to one or more issuers of insider securities, or to the insider securities themselves, which, if it became publicly known, would likely have a significant effect on the stock exchange or market price of the insider security" - section 13 WpHG) several weeks earlier.

I don't see a specific need to advise the agency, however, you may want to check whether they have entered you in their List of Insiders (section 15b WpHG).

BaFin have published an Issuers' Guide which contains relevant information.

HTH - best regards,
Ralf


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xxxsarahl
Local time: 18:07
English to French
+ ...
Ethics Jan 21, 2006

Ralf Lemster wrote:

The annual report is indeed published to all shareholders, but translators usually get access to information which may constitute inside information ("any specific information about circumstances which are not public knowledge relating to one or more issuers of insider securities, or to the insider securities themselves, which, if it became publicly known, would likely have a significant effect on the stock exchange or market price of the insider security" - section 13 WpHG) several weeks earlier.

Ralf


Yes, we all hear priviledged information every now and then, and we don't use it because it wouldn't be ethical. This holds true even if we don't own stock in the company we happen to be working for, as what's to stop us from going out and buying stock right after a conference? Ethics.

I agree with Ralph, as long as you don't *use* that information, your're not breaking any laws. Incidentally, there is no law against insider *information*, what's illegal is insider *trading*. There's your answer: don't trade!


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Benno Groeneveld  Identity Verified
United States
Local time: 21:07
English to Dutch
+ ...
Most financial publications Jan 21, 2006

in the US insist their staff members not trade shares in any company until a few days/weeks after an article mentioning the company has appeared.

In case of translating an annual report, I would not trade any shares until at least a week after the report has been published.

Investing through a mutual fund is an easy way to avoid any conflict of interest (unless, of course you translate the fund's annual report, in that case the waiting rule would apply).


[Edited at 2006-01-21 20:41]


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Samuel Murray  Identity Verified
Netherlands
Local time: 03:07
Member (2006)
English to Afrikaans
+ ...
The client might make last-minute changes anyway Jan 22, 2006

Jalapeno wrote:
Do you think it would be unethical for me to translate the annual report of a company I own stock in? After all, that would provide me with insider information...


I think it's fine. As long as you don't use the information nor tell anyone about it, you're fine. However, don't be surprised if what you've translated and what you receive in the post a few weeks later is not the same thing. It's an old trick with financial statements to change a few select things in the report shortly before it goes live, and one reason for doing so is to prevent people like yourself (and everybody else who have access to the report before the release date) from using the information. I see these tactics often because I work for an office in which we have to retranslate every change, and sometimes the changes are trivial, and sometimes they are major, but in most cases the changes would have affected a would-be inside traders's ability to get away with it.


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