Hacking IPO Investing: Wall Street and the Crumbling of Chinese Walls
The “Chinese wall” phenomenon is named – somewhat mysteriously – for the Great Wall of China (Severin Stalder)
The biggest financial firms of the world — like Morgan Stanley, J.P. Morgan, Goldman Sachs — are multifaceted entities, with many roles. They consult the financial activities of corporations and of individuals. They manage investment and issue recommendations, both to their clients individually, and in the form of public reports. They’re banks, which lend money, and store it at interest, and which underwrite (assume liability for) major fiscal events, like a company’s initial public offering (IPO) of stock on the public market.
This diversity of functions opens the door to many potential conflicts of interest. A firm could potentially abuse its influence in one branch to make money overall.
What has been called a “Chinese wall” is said to exist between the different sectors...
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