Financiers Admit: Lots of Us Are Corrupt | Chief Investment Officer

Nearly one in three feel pressured to violate the law or their own ethics, according to a survey, and one quarter believe it’s necessary to get ahead.

(November 28, 2012) – Finance is a dirty game, according to many of the people playing it.

A survey commissioned by Labaton Sucharow, a law firm specializing in whistleblower-protection, questioned 500 senior finance professionals about the prevalence of improper conduct.

Nearly 40% of respondents said their competitors have likely engaged in illegal or unethical behavior to get ahead. Slightly more Wall Street (40%) than City (36%) types thought their counterparts at other firms had been into something fishy.

Respondents were evenly split between London and New York.

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Perhaps unsurprisingly, most had a cleaner view of their own workplaces than those of the competition. Just 12% in total believed it was likely that staff in their company had engaged in illegal or unsavory activity in order to be successful. That said, 59% didn’t rule out the possibility (39% in the UK; 43% in the US).

One of the most dramatic findings comes from the finance sector’s attitudes towards regulatory authorities. Only 30% believed that the US Securities and Exchange Commission (SEC) or UK’s Serious Fraud Office effectively deter, investigate, and prosecute securities violations.

“While financial regulators and law enforcement authorities across the globe have new leadership, new investor protection initiatives and record enforcement activity, professionals in the financial services industry do not yet believe that these watchdogs are effectively protecting the public,” the report asserted.

Women tended to trust and believe in these institutions more than men, with 40% having a favorable opinion, as opposed to 27% of men. The least trusting group were males working in the US, of which only 21% thought the SEC was working effectively.

Financiers ought not be too quick to dismiss the SEC, however, judging by the regulator’s latest results. In fact, the SEC may have outperformed many of these respondents recently.

The regulatory agency returned double its $1.5 billion budget in fiscal year 2012, levying fines totaling more than $3 billion. Of course, those fines go to wronged parties, not the SEC itself.

But we all know where those fines are coming from.

(November 28, 2012) — More than 70% of Harvard University’s roughly 3,600 undergraduate students want to ditch fossil fuel investments from the school’s endowment.

Earlier this month, the Harvard College Undergraduate Council revealed students had voted–by a large margin–for the $30.7 billion university endowment to divest from the top 200 publicly traded companies that own the majority of fossil fuel reserves.

The overwhelming support for the divestment follows a slew of similar campaigns at other colleges around the country. “We are so excited that Harvard and so many other schools have joined the movement. In particular, we were thrilled to hear that 72% of the Harvard student body supported the referendum,” Sachie Hopkins-Hayakawa, an organizer of the fossil fuel divestment campaign at Swarthmore College, wrote in an email to the Harvard Crimson, the university’s newspaper.

Nevertheless, Harvard’s administration said that it is “not considering” divestment, and student attempts to meet University President Drew G. Faust to discuss the issue have been unsuccessful, the Crimson reported.

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“In 1990, 52% of voting students supported complete divestment from apartheid South Africa,” said Chloe Maxmin, a co-coordinator for Harvard University student organization Divest Harvard, in a statement. “[Now] 72% of voting students are raising their voices for fossil divestment, telling Harvard to stop investing in companies that are threatening our future.”

Pressure among environmental activists on asset owners to divest from fossil fuels is apparent. Last year, a report, warning of a “carbon bubble”, argued that the world’s financial markets have vastly inflated the value of fossil fuel reserves because future regulation will ensure that most of it will remain in the ground. The research by the Carbon Tracker Initiative, a group claiming to offer a “new way of looking at the carbon emissions problem,” asserted that a “carbon bubble” has occurred because financial markets have valued known fossil fuel reserves as assets. The report, “Unburnable Carbon –Are the World’s Financial Markets Carrying a Carbon Bubble?”, thus argued that valuing fossil fuel reserves as assets is a mistake.

As asset owners increasingly look to commodities for inflation hedges and diversification, they may need to reconsider the long-term stability of those investments, the report said. Asset owners need to ask whether their “asset allocation decisions [are] based on obsolete data regarding the full risks facing fossil fuel reserves” and whether a large portion of their investments “may be unburnable carbon.”