Tag: golf

A Cliche Is Proven

golf insider trading compliance

One cliche thrown around is that tipping a golf buddy to material non-public information is an insider trading violation. The Securities and Exchange Commission just filed a case that proved that cliche true.

Eric McPhail learned the expected earnings and major pending corporate developments at American Superconductor through a friend who is (was?) an executive at that company. They were good friends and golfed together at the same country club. Confidentiality was expected.

However, Mr. McPhail took that information and tipped it to six of his other golfing buddies. At least according to the SEC complaint. Four of the golfing buddies consented to judgement, returned their trading profits, and paid fines.

Mr. McPhail is not accused of trading in the stock. He is charged with illegal tipping.

Unfortunately for the golfing buddies, their communication about the stock was not limited to the golf course. The SEC complaint is full of email messages discussing the stock and material non-public information. In one email, Mr. McPhail hopes to be paid back by his golfing buddies with pinot noir and steak.

The American Superconductor executive is not named in the complaint.

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A Triumph Of Sports Ethics

With all of the fraud and corruption stories in the news, how about a feel-good story: J.P.  Hayes. Mr. Hayes disqualified himself from a PGA Tour qualifying event when he realized he had accidentally used an unapproved golf ball for two shots. Not two rounds; Not two holes; two shots.

By disqualifying himself he became ineligible to play full-time on the PGA Tour in 2009.

On his 12th hole of the first round at Deerwood Country Club, Hayes’ caddie reached into his golf bag, pulled out a ball and flipped it to Hayes, who missed the green with his tee shot. He then chipped on and marked his ball. It was then that Hayes realized the ball was not the same model Titleist with which he had started his round. That was in violation of the one-ball rule, which stipulates that a player must play the same model throughout a round. He called an official over and took the two shot penalty. With the two-stroke penalty, Hayes shot a 74. He came back with a 71 on Thursday and was in good shape to finish among the top 20 and advance to the final stage to earn exempt status on the PGA Tour for the following year.

After the second round, Hayes realized that the wrong ball he had played in the first round might not have been on the USGA’s approved list. It was a Titleist prototype he test a few weeks earlier. Hayes called an official, confirmed the problem and accepted the disqualification.

It is easy to be noble and upstanding when people are watching you. When nobody is watching and  you can get away with doing the wrong thing is when you find out what kind of person you are.

Mr. Hayes can sleep better at night knowing he did the right thing. You can’t buy that kind of sleep.

Don’t think that tournament sponsors didn’t notice this story. I would bet they would love to have story of integrity as part of their 2009 tournament. Maybe Hayes will end up getting more special invites to play in upcoming events than he would if he made Q school.

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