Labaton Sucharow’s July 2013 U.S. Financial Services Industry Survey

Executive Summary

As we share the results of our second annual survey of the US financial services sector, and approach the third anniversary of the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are mindful that much has changed on ‘The Street.’

To be sure, over the last decade, scandal and corruption have eroded public faith in the markets. We have witnessed the global economy in precipitous decline, leaving a casualty trail from seemingly impenetrable institutions like Lehman Brothers, to small businesses and everyday individuals who have lost jobs, homes and retirement savings.

We have hoped for, and worked toward, a better future. Governments around the world have enacted aggressive reforms to ensure greater transparency and accountability. Corporate behemoths and financial institutions have taken a more judicious approach to risk management. Industry leaders have made promises to employees and the public at large–promises about ethics and responsibility. But the reality is, we now face a moment of unparalleled crisis; many of these promises have gone unfulfilled and if we don’t take swift collective action, the battle cry this can’t happen again will be nothing more than background music to the next, more potent economic tsunami.

In this second annual survey of the US financial services sector, we uncovered astonishing data about the state of our markets and, notably, an abject decline in the three forces that, individually and together, have the power to serve as safety nets for the economy: individual integrity, leadership and corporate culture. A particularly troubling and consistent finding throughout the survey is that Wall Street’s future leaders–the young professionals who will one day assume control of the trillions of dollars that the industry manages—have lost their moral compass, accept corporate wrongdoing as a necessary evil and fear reporting this misconduct. This is a ticking economic time bomb that responsible organizations must immediately defuse or pay a heavy price.

One sign of hope was the heightened confidence in the regulatory authorities that oversee the financial marketplace. For several years, it has become popular to criticize financial regulators. Now, as a result of leadership changes, organizational reforms and a more aggressive enforcement approach, financial services professionals have greater confidence in these organizations’ ability to effectively and efficiently police the marketplace. We predict that industry confidence will continue to grow as awareness of the SEC Whistleblower Program grows and the program’s successes are made public. Ironically, for an industry that almost universally calls for less government, financial regulators appear to be the only place where Wall Street professionals place real faith.

As the first law firm to establish a national practice exclusively focused on protecting and advocating for SEC whistleblowers, and with five decades of experience successfully prosecuting high-profile and high-stakes corporate wrongdoing for prominent institutional investors around the world, we at Labaton Sucharow are certain of one thing: Wall Street is facing an ethical crisis. Our survey revealed that wrongdoing is widespread, misconduct is accepted and there is a fundamental breakdown in trust between employers and their employees.

Ultimately, we believe that the best way to ensure that the marketplace operates with greater transparency, fairness and accountability is to recognize the powerful troika—regulators, corporations and individuals—that has the ability to establish and strengthen a culture of integrity that will create lasting change in the financial markets. There is no question that we have the power to change course but first we must admit that Wall Street has a significant and growing ethical crisis and act now to address the problem.

Download the full 2013 Survey here.