Tuesday, April 2, 2013
Hedge Fund Industry Survey Reveals More than One-Third of Professionals Feel Pressured to Break the Rules in Pursuit of Alpha
Significant percentage of hedge fund professionals have witnessed misconduct and lack faith in regulators and fund leadership
NEW YORK (April 2, 2013) – 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 percent) believe that their competitors engage in illegal activity; more than one third (35 percent) have personally felt pressure to break the rules and about one third (30 percent) have witnessed misconduct in the workplace.
When asked if they would blow the whistle or report the misconduct, 87 percent of respondents said they would report wrongdoing given the protections and incentives such as those offered by the SEC Whistleblower Program. This investor protection program has broad extraterritorial reach and offers eligible whistleblowers, regardless of nationality, significant employment protections, monetary awards and the ability to report anonymously. To ensure that adequate funds are available to pay awards, Congress has established a replenishing Investor Protection Fund, which currently has a balance in excess of $450 million.
"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," remarked Christopher Clair, Managing Editor at Hedgeworld. "It's only when we eliminate the unfair advantages sought and exploited by some that true alpha can be found."
"The high percentage of hedge fund professionals that are aware of the SEC Whistleblower Program and are willing to report wrongdoing is extremely encouraging," said Jordan Thomas, Chair of the Whistleblower Representation Practice at Labaton Sucharow. "Without individuals willing to report possible securities violations, internally or externally, responsible organizations and law enforcement authorities cannot police the marketplace effectively and efficiently."
The survey's top ten findings include:
"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."
About the Survey
Between February 25-March 17, 2013, ORC International conducted a confidential online survey of 127 respondents age 18 or older who work in the Hedge Fund industry. The sample for the study came from three sources: HedgeWorld, The Hedge Fund Association and ResearchNow.