Hedge Fund Survey: ‘Findings Are Troubling’

Early last year the US Attorney for the Southern District of New York, Prett Bharara, in alluding to activities within the hedge fund community asserted that insider trading was rampant and routine. Strong words.

Fast forward a year and a recent survey of those within the hedge fund world unsurprisingly shows that a host of issues remain and that the “findings are troubling.” Let’s navigate and review the results of this recent survey:

An independent survey of hedge fund professionals commissioned by law firm Labaton Sucharow LLP, HedgeWorld and the Hedge Fund Association, revealed that nearly half (46%) believe that their competitors engage in illegal activity, more than one third (35%) have personally felt pressure to break the rules, and about one third (30%) have witnessed misconduct in the workplace.

Hey now . . . feel better about navigating the markets in the company of some of these sharks?

The survey’s top ten findings include:

46% of respondents reported that their competitors likely have engaged in unethical or illegal activity in order to be successful.

35% of respondents reported feeling pressured by their compensation or bonus plan to violate the law or engage in unethical conduct, while 25% of respondents reported other pressures that might lead to unethical or illegal conduct.

30% of respondents reported that they had personally observed or had first-hand knowledge of wrongdoing in the workplace.

87% of respondents would report wrongdoing given the protections and incentives such as those offered by the SEC Whistleblower Program, while 83% of respondents were aware of this important program.

29% of respondents reported that it was likely that they would be retaliated against if they were to report wrongdoing in the workplace.

28% of respondents reported that if leaders of their firm learned that a top performer had engaged in insider trading, they would be unlikely to report the misconduct to law enforcement or regulatory authorities; 13% of respondents reported that leaders of their firm would likely ignore the problem.

54% of respondents reported that the SEC is ineffective in detecting, investigating and prosecuting securities violations.

34% of respondents reported that recent regulation and law enforcement scrutiny will weaken the hedge fund industry.

13% of respondents reported that hedge fund professionals may need to engage in unethical or illegal activity in order to be successful and an equal percentage would commit a crime—insider trading—if they could make a guaranteed $10 million and get away with it.

93% of respondents reported that their firm put the best interests of investors first.

“Our members have a deep commitment to corporate integrity,” noted Lara Block, Executive Director of the Hedge Fund Association.   “Although some of the findings are troubling, this groundbreaking survey provides valuable insights that will help the industry to further strengthen its investor protection programs and root out any bad actors.”

Root out any bad actors? Really?

Or is it really cheating if you do not get caught?

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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