THE INSIDER In 2011, a federal jury convicted a stock trader who worked for a well-known investment firm, along with two alleged accomplices, of insider trading. According to the indictment, the trader got inside information about pending mergers from lawyers. The lawyers allegedly browsed around their law firm picking up information about corporate deals others in the firm were working on. The lawyers would then allegedly pass their information on to a friend, who in turn passed it on to the trader. Such inside information reportedly helped the trader (and his investment firm) earn millions of dollars. The trader would then allegedly thank the lawyers, for instance, with envelopes filled with cash. Of course, things like that are not supposed to happen. Federal and state laws prohibit it. And investment firms have their own compliance procedures to identify and head off, for instance, shady trades. The problem is that controlling such behavior once the firm has someone working for it who may be prone to engage in inside trading isnt easy. Better to avoid hiring such people in the first place, said one pundit. At lunch at the Four Seasons restaurant off Park Avenue in Manhattan, the heads of several investment Firms were discussing the conviction, and what they could do to make sure something likes that didnt t occur in their firms. It s not just compliance, said one, we have got to keep the bad apples from ever getting in the door. They ask you for your advice.

Questions: ( 2 Q X 2 Marks = 4 Marks)

1. We want you to design an employee selection program for hiring stock traders. We already know what to look for as far as technical skills are concerned accounting courses, economics, and so on.

2. What screening test(s) would you suggest, and why?