John Dutemple made the following trades, for a family trust account, Monday, December 18 with limit orders:
Bought Ennis, Inc. (EBF)
Bought Nike, Inc. (NKE)
John Dutemple made the following trades, for a family trust account, Tuesday, December 18 with limit orders except as noted:
Bought Ennis, Inc. (EBF)
Bought Harmony Gold Mining Company ADR (HMY) *
Sold Harmony Gold Mining Company ADR (HMY) (Market order) *
Sold short Harmony Gold Mining Company ADR (HMY)
Sold short Cemex SAB de CV ADR (CX)
Sold short JA Solar Holdings ADR (JASO)
* Mr. Dutemple incorrectly entered a BUY order instead of a SELL SHORT order and corrected his error on discovery after it was executed. These trades violated two provisions in the firm's Code of Conduct:
1) Two transactions (the initial purchase and the subsequent sale to reverse the error) were made without posting the trades 24 hours in advance.
2) A BUY and a SELL order on the same security were entered within a 60 day period.
Though the Code was violated, the rationale behind the two provisions were not. In the first case (posting transactions ahead of trades), the provision is in place to prevent front-running, i.e. making trades ahead of clients. The violations in this case were not intended to hide Mr. Dutemple's intent, but rather were an error and its immediate correction followed by the transaction that was posted prior.
The second provision is in place to discourage short-term trading on price data and encourage analysis of the firm on a fundamental basis. Again, the short holding period was due to the correction of an error, not an attempt at short-term profit.