Compliance

01:38 PM
Connect Directly
Facebook
Google+
LinkedIn
Twitter
RSS
E-Mail
50%
50%

SEC Enforcement Efforts Fail To Impress Wall Street Execs

Despite recent high-profile insider trading arrests, a new survey of 500 financial professionals shows most do not feel the SEC is effective.

Despite recent high-profile insider trading arrests on Wall Street, a new survey of 500 financial professionals has revealed that 74% feel that the SEC/SFO does not effectively deter, investigate or prosecute securities violations.

The poor view of the SEC held by many on Wall Street comes despite the fact that the regulator has recently stepped up its efforts to stop insider trading and other misconduct through initiatives that include the Whistleblower Program.

Recent high-profile arrests include disgraced hedge fund manager Raj Rajaratnam and former McKinsey & Co global head Rajat Gupta.

In 2011, the SEC brought about 57 insider trading enforcement actions against 124 individuals and entities, a nearly 8 percent increase in the number of filed actions from the previous year.

“In the last several years, the SEC has had new leadership, new investor protection rules and record enforcement actions both in numbers and monetary. But 74% think it is not effective,” says Jordan Thomas, partner and chair of the Whistleblower Representation Practice at Labaton Sucharow, the New York law firm which commissioned the report.

Many on Wall Street feel that the SEC is simply not equipped to effectively regulate the market. [For more on this, Look out for Firing Blanks: Why the Regulators Can't Win, in our July digital issue.] Indeed, the SEC has a limited budget and fewer technology resources than the big financial players it regulates. [For more on this, read my recent blog, Inside The SEC’s Tech Department].

But at least as far as the Whistleblower Program is concerned, it simply looks like the SEC needs to blow its own horn a little more.

The survey of 500 financial professionals in the U.S. and UK revealed that 26% of respondents have observed or had firsthand knowledge of wrongdoing in the workplace.

Yet only 44% of financial executives are actually aware of the Whistleblower program, despite the fact that it was passed into law in 2010 as part of the Dodd-Frank Act, according to the survey.

The program has the potential to be highly effective, given that 94% say they would report misconduct in the workplace if it could be done with the factors present in the SEC Whistleblower program – anonymity, employment protections and a monetary award.

Despite the SEC’s good intentions, though, it still has its work cut out.

The survey revealed that 24% of financial professionals believe they may need to engage in unethical or illegal conduct to be successful.

Further, asked whether they would engage in insider trading to reap $10 million, 45% said they would if they faced no risk of getting arrested.

“The results are deeply troubling. They reflect a significant problem in the culture of the financial industry,” Thomas says.

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

Comment  | 
Print  | 
More Insights
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
Stressed Out by Compliance, Reputational Damage & Fines?
Stressed Out by Compliance, Reputational Damage & Fines?
Financial services executives are living in a "regulatory pressure cooker." Here's how executives are preparing for the new compliance requirements.