Integrity In Finance

integrity in finance

Integrity In Finance


Rules are important. Regulations are important. Integrity in finance is also important.  Boundaries of acceptable actions are important. Just as the rules guiding the behavior of a child, regulations are boundaries for adults. Telling a child they have to finish their meal and if they don’t finish, they won’t have dessert. Giving a teenager a curfew that, if broken, will result in being grounded. It all provides boundaries for behavior. When boundaries are crossed punishment is enforced. As we grow to adulthood, enforcement of crossing boundaries become the job of societies chosen enforcement agencies. The Securities & Exchange Commission (SEC) as financial regulators must enforce noncompliance.


Walk into the office of any compliance officer and you will find row upon row of rulebooks. But those large leather-bound rulebooks offer the framework for how a self-regulatory organization must operate.  They can provide the boundaries, but they can’t enforce compliance.

Madoff Investment Fund was reported to the SEC 9 times by an asset manager in Boston. Nothing further than a cursory investigation was undertaken. Had the SEC compared the reported trades to the volume of contracts traded, they would have seen a reason to pursue Mr. Madoff further.  The amount of heartache and destruction a full investigation could have prevented is staggering.

Jon Corzine directly or indirectly allowed desegregation of clearinghouse funds.  John Corzine hasn’t answered for his actions and lack of oversight.  Investors received 84 cents on the dollar and the industry seems to have moved on from the event.

In the first event, the criminal was clear, he confessed and is now serving his sentence.  The second event illustrates the issue of assigning responsibility to a person or group without changing the current laws regarding charges against a corporation.  


In 2008 saw the great credit crisis come and go.  Suddenly Congress bangs on their tables saying a solution must be found!! I question their surprise.  Their disingenuous response was insulting to the financial markets.

  • They voted for the Affordable Housing Act under G.W. Bush.  At a minimum, they read about it or saw it on the evening news. 
  • They must have considered the results of The Affordable Housing Act.  i.e., low doc/no-doc mortgages
  • They must have considered the ramifications before completely dismantling The Glass-Steagall Act.  

One has to presume they put some work in before entering the chamber to vote.  Perhaps perpetual optimism doesn’t serve me in this area.  

Regulations without consequences are meaningless. Unless reports of non-compliance are investigated, unless obvious violations are punished completely, any regulation is just words on a page. Little more.


Dodd-Frank must include enforcement with punitive measures. Those punitive measures must include the possibility of criminal charges. Using the sandbox as an analogy, if a person cannot follow the rules of the sandbox, they should be removed from the sandbox. Permanently.

Any business where large amounts of money are involved, require people to examine their personal ethics and (hopefully) keep their moral compass true North.  Maybe if summer homes and new cars became secondary to fiduciary responsibility; If servicing clients and ethical responsibility to their employers, an underlying culture of morality would expand organically.


Don’t get me wrong, I’m not a charity. I work with the client offering the most money for work I’m able to complete on time. It’s just good business sense. 

While the handshake agreement may be out-dated in reality, “You’re done” is still a binding contract in the financial markets. Those who do not play by the rules need to be removed from the sandbox. Lest the sandbox resemble another kind of box and no one will play in a dirty (cat littered) sandbox.

TAGS: bank credit crisisbankingethicsethics in bankingregulationrogue bankers


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