Morality is a scarce, incredibly expensive resource in the financial services industry. Professionals are beset by an endless cycle of ethical skirmishes, with many resigning themselves to the conclusion: “I cannot afford to be moral, and if any one tells you they can they’re lying.”
Yet, what they do not understand is that with each incremental compromise of their character, they surrender a bit more of their integrity. Unbeknownst to them, there are consequences to these moral sacrifices.
Fraud and deception statistics are startling. The number of claims filed by investors concerning stockbroker fraud and other breaches of fiduciary duty escalated significantly in 2009, according to statistics released by the Financial Regulatory Authority (FINRA), which regulates more than 5,000 brokerage firms in the US.
Estimates place the number of claims by investors seeking to recover losses on track to top 7,000 this year. By comparison, there were only 4,982 securities fraud arbitration claims filed for the entire year in 2008 and 3,238 filed in 2007. In reality, and in life, most of us understand that many claims are not filed as a function of avoidance, laziness, fear, paranoia, marginal thinking, denial, and so forth and so on.
According to online researcher AboutLawsuits.com: “Not only are there more claims, but more claimants are finding success in their investor arbitration cases, which may be attributable to new SEC rules enacted at the beginning of the year that restricts defendants’ ability to file a motion to dismiss. The rule was designed so that more claimants’ cases would receive hearings on their merits and to prevent defendants from attempting to delay hearings, increasing costs for investors and generally intimidating them out of arbitration.”
In fact, in April 2009, lobbyists for investment planner professionals submitted a request to congressional lawmakers to create a national regulatory body to oversee their industry and establish industry-wide standards. At that point in time, almost anyone could claim to be a financial planner, and did not need to be credentialed as a Certified Financial Planner.