Due Diligence

Open Secret? Crime Pays Say Financial Services Execs

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Illegal and unethical activity may be part of the fabric of life at financial services firms in U.S and U.K., a recent survey from law firm Labaton Sucharow, released Tuesday, suggests. The study was meant to coincide with the release of the firm’s new whistleblower tool, aimed at allowing potential whistleblowers to determine whether they are eligible for the SEC Whistleblower Program.

Giant financial services firms continue to make giant missteps, with their alleged crimes splashed across the headlines. Most recently, Barclays was slapped with $450 million in fines for manipulating interest rates. In the unethical as opposed to illegal category, former brokers of J.P. Morgan told the New York Times that the firm pushes its own proprietary products on them.

Almost one quarter, or 24 percent of survey respondents, reported belief that financial services professionals may need to engage in unethical or illegal conduct in order to be successful—though this number surged to 39 percent when respondents were asked about whether their competitors used unethical or illegal conduct to be successful. Another 26 percent said they had witnessed or had firsthand knowledge of wrongdoing in the workplace. About 16 percent said they would engage in insider trading if they could get away with it.

Close to a third, or 30 percent of respondents, said their compensation or bonus created pressure to compromise ethical standards or violate the law, while 23 percent of respondents reported other pressures could lead to unethical or illegal conduct. The same share of respondents said they believe securities regulators in the U.S. or U.K. effectively deter, investigate and prosecute misconduct.

The survey was conducted online between June 19 and 25 by marketing research firm Populus. Some 250 senior individuals within the financial services industry were questioned. The full methodology is available here

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