Thirty-five percent of industry workers report feeling pressured to break the law, survey shows
About 30 percent of hedge fund professionals in the US have witnessed misconduct in their workplace and 46 percent believe their competitors engage in illegal activity. This is the headline finding of a survey of hedge fund employees conducted by law firm Labaton Sucharow and two industry groups.
The survey also reveals that some 87 percent of hedge fund professionals would report wrongdoing at their company if given protections and incentives under the SEC’s Whistleblower Program, which rewards whistleblowers with a payment of as much as 30 percent of any successful monetary sanction against the company.
‘Our members have a deep commitment to corporate integrity,’ says Lara Block, executive director of the Hedge Fund Association, which supported the survey, along with news source HedgeWorld. ‘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.’
According to the survey of 127 hedge fund professionals taken between February 25 and March 17 by research consultancy ORC International, 35 percent of the respondents say they have felt pressured to break the law or violate their ethical standards for bonuses or compensation. One in four also reports other pressures not related to pay.
Thirteen percent of those surveyed say they would commit a crime if they knew they could make $10 mn and get away with it, and the same number say a hedge fund may need to break the law or violate its ethical standards to be successful.
About 28 percent of respondents say that, if their firm learned that a top performer had been engaged in insider trading, it would likely not report the illegal activity to authorities, and 13 percent say the company’s management would ignore the issue. But 93 percent of the respondents maintain their firm always puts the best interests of its investors first.
‘While wrongdoing in the hedge fund industry may not be as widespread as many outside the industry believe, it does occur, and people in the industry are aware of it,’ says Christopher Clair, managing editor at HedgeWorld, in a press release. ‘It’s only when we eliminate the unfair advantages sought and exploited by some that true alpha can be found.’
