Thursday, 24 July 2014
Last updated 11 hours ago
Apr 2 2013 | 9:13am ET
In the wake of the latest high-profile insider trading arrest—that of SAC Capital's Michael Steinberg—a new survey of hedge fund professionals shows more than one third (35%) have felt pressure to break the rules.
That pressure, according to the survey commissioned by law firm Labaton Sucharow, HedgeWorld and the Hedge Fund Association, came from the respondents' compensation or bonus plans. Another 25% of respondents reported other pressures that might lead to unethical or illegal conduct.
Almost half (46%) of the 127 respondents said they believed their competitors engaged in illegal activity to succeed and about one third (30%) had witnessed or had first-hand knowledge of misconduct in the workplace.
The survey contained some good news for the Securities and Exchange Commission—a whopping 87% of respondents claimed they would report wrongdoing given “protections and incentives” such as those offered by the SEC's Whistleblower Program.
"The high percentage of hedge fund professionals that are aware of the SEC Whistleblower Program and are willing to report wrongdoing is extremely encouraging," said Jordan Thomas of Labaton Sucharow in a statement. "Without individuals willing to report possible securities violations, internally or externally, responsible organizations and law enforcement authorities cannot police the marketplace effectively and efficiently."
That's the good news, on the other hand, 54% of respondents said the SEC was “ineffective” in detecting, investigating and prosecuting securities violations.
Another 29% of respondents feared retaliation were they to report wrongdoing while 28% believed their firm leaders would be unlikely to report insider trading involving a top performer and 13% said their firms would ignore the problem.
The same proportion of respondents—13%—felt hedge fund professionals might need to engage in unethical or illegal activity to succeed and an equal percentage would engage in insider trading if they were guaranteed to make $10 million and get away with it.
A full 93% of respondents reported that their firm put the best interests of investors first.
The survey was conducted between February 25-March 17, 2013 by ORC International.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…