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Jordan A. Thomas discusses the findings of a new survey which he says demonstrates that mistrust of the finance industry goes well beyond Main Street.
All Things Considered from WNYC:
Richard Hake Interviews Jordan Thomas on Recent Ethics Survey
July 16, 2013
Richard Hake: In a survey of hundreds of people working on Wall Street, more than 1 in 5 said they’ve seen or heard about wrongdoing in the workplace. A quarter said they’d engage in insider trading if it meant making big money. Those are two findings of a rather startling new survey out from the law firm Labaton Sucharow. Jordan Thomas is a partner there and wrote the results of his survey and he joins us now, welcome to WNYC…
Jordan Thomas: Thank you. It’s good to be here.
Richard Hake: The report is called Wall Street in Crisis, A Perfect Storm Looming. What do you think is the most troubling finding that you made?
Jordan Thomas: I’ll tell you there are three things that are particularly troubling. One is that the bad conduct that we saw in our survey from last year got worse. The second thing was that younger professionals were more likely not less likely to engage in misconduct, condone or accept misconduct, and to fear reporting misconduct. The third aspect of it was particularly troubling for a former stock broker like myself — 28 percent of financial services professionals indicated that the industry did not put the best interest of the client first. That is the bedrock on which our financial system has been developed.
Richard Hake: Now Jordan, you once worked at the SEC. Doesn’t that suggest that maybe a lot of the crimes are not being noticed by regulators?
Jordan Thomas: It does suggest that there is a good deal of misconduct that is not reported or detected by the SEC. That’s actually one of the silver linings of the survey is that there was an increased confidence in the SEC and FINRA in their effectiveness in detecting, investigating and prosecuting misconduct. There also was a high level of willingness to report misconduct based on the tenets of the SEC Whistleblower Program which is the ability to report anonymously, have employment protections and have monetary rewards. There was a dramatic increase in the awareness of the SEC Whistleblower Program by more than 20 percent.
Richard Hake: Now we’ve been through the worst financial crisis in decades and cynicism about banks is really high. Does this mean Americans are right to be mistrustful of Wall Street?
Jordan Thomas: I think people on Wall Street are distrustful of Wall Street. Our survey actually indicated that 24 percent of financial services professionals feared they would be retaliated against if they reported misconduct. 17 percent thought that the leadership of their organization would look the other way if they suspected that a top performer had engaged in misconduct. 15 percent thought the leadership of their organization would not report actual misconduct known to the firm to law enforcement authorities. So, there is a healthy degree of distrust out there.
Richard Hake: Did the survey at all look at the level of employee? Is it more of an entry level? Or one of the higher ups on the hierarchy of a firm?
Jordan Thomas: The survey looked at basically all levels of people. The key breakdown that we saw significant differences in answers was professionals who have 10 years or less and those who have more than 10 years. Those with 10 years or less consistently had more troubling answers in almost every area.
Richard Hake: We have just about 30 seconds left but you mentioned earlier that this year was worse than last year. This is the second year that you are doing the survey. You mentioned worse, how worse?
Jordan Thomas: Well, basically the extent of misconduct and the extent to which misconduct was accepted. The extent that people feared coming forward. The temptation that people felt to engage in misconduct. Really almost in every way these numbers were significantly higher.
Richard Hake: Jordan Thomas is a partner at Labaton Sucharow. He is also formally with the Securities and Exchange Commission and in the Justice Department. Thank you so much for joining us.
Jordan Thomas: Thanks for having me on your show.
In our second annual survey of the U.S. financial services industry, we unearthed alarming data about the state of the market and those professionals who uphold its strength. The sector shows a decline in the three areas that best insulate our economy: individual integrity, leadership and corporate culture. Of great concern, we found that Wall Street’s young professionals, the future leaders who will take the wheel managing trillions of dollars, have a fractured moral compass. These individuals accept corporate wrongdoing as the way things work and fear reporting misconduct.
Some key findings from our 2013 survey:
All is not lost. Some findings inspired confidence in Wall Street’s ability to course correct, including that 62% of those surveyed felt the SEC effectively detects, investigates and prosecutes misconduct. In addition to this faith in law enforcement, the survey underscored faith in the agency’s whistleblower program. Indeed, a full 89% of respondents would report workplace misconduct with the three pillars of the program – guaranteed anonymity, employment protections and the prospect of a significant monetary award.
In 2011, we commissioned our first survey to take the pulse of the country on the observation of corporate misconduct and the willingness to report it. Our early findings showed that most Americans had witnessed misconduct and most were willing to report it with protections and incentives such as those offered by the SEC Whistleblower Program.
With a year of whistleblower advocacy under our belt, we conducted our 2nd Annual Ethics & Action Survey. In addition to examining whether views had changed since our first analysis, we investigated Americans’ views on the actual reporting of corporate wrongdoing, the connection between corporate misconduct and the fractured economy and, importantly, the government’s role in reform and repair.
What were some key findings?
In 2011, just months after the SEC adopted the final rules to establish its revolutionary whistleblower program, we commissioned a survey of more than 1000 Americans to gauge the public’s observation of workplace misconduct. We weren’t surprised that more than one-third of those polled had first-hand knowledge of wrongdoing. While we were pleased to note that 78% of Americans indicated that they would report misconduct with the protections and incentives available under the Commission’s program, an alarming 68% were not aware of the SEC’s program.
In all, the survey confirmed that taking a meaningful stand against corporate crime will require an aggressive campaign to educate Americans on the game-changing program to detect and deter securities fraud.
For more than 25 years, the Ethics & Compliance Initiative (formerly known as the Ethics Resource Center), widely recognized as the definitive corporate ethics organization, has commissioned the National Business Ethics Survey (NBES) to poll employees about their workplace and its ethical culture.
This supplement to the 2011 NBES, Inside the Mind of a Whistleblower, takes a step further, to gain a greater understanding of who reports misconduct, why and to whom. Among the report’s fascinating data, it is particularly compelling that only 18% of respondents chose to tell someone outside their company, of whom a mere 3% reported externally in the first instance. These figures are a sobering tonic to those who cry that whistleblowers are mercenary employees with a grudge. Instead, these individuals are company loyalists, who – at 80% – choose to report misconduct to cure it.