Nearly half of hedge fund managers believe their competitors engage in illegal activity, finds a survey by law firm Labaton Sucharow LLP, HedgeWorld and the Hedge Fund Association. Further, 35% have felt pressure to break the rules, and 30% have witnessed misconduct in the workplace.

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When asked if they would blow the whistle or report the misconduct, 87% said they would, given the protections and incentives such as those offered by the SEC Whistleblower Program. This investor protection program offers eligible whistleblowers, significant employment protections, monetary awards and the ability to report anonymously. To ensure 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.

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“Without individuals willing to report possible securities violations, internally or externally, responsible organizations and law enforcement authorities cannot police the marketplace effectively and efficiently,” says Jordan Thomas, chair of the Whistleblower Representation Practice at Labaton Sucharow.

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The survey’s other findings include:

  • 46% report their competitors likely have engaged in unethical or illegal activity in order to be successful;
  • 25% report other pressures that might lead to unethical or illegal conduct;
  • 29% say they’d likely would be retaliated against if they were to report wrongdoing in the workplace;
  • 28% say if leaders of their firms learned a top performer had engaged in insider trading, they would be unlikely to report the misconduct to law enforcement or regulatory authorities; 13% report leaders of their firm would likely ignore the problem;
  • 54% say the SEC is ineffective in detecting, investigating and prosecuting securities violations;
  • 34% note recent regulation and law enforcement scrutiny will weaken the hedge fund industry;
  • 13% say hedge fund professionals may need to engage in unethical or illegal activity in order to be successful and an equal percentage would commit a crime—insider trading—if they could make a guaranteed $10 million and get away with it;
  • 93% report their firms put the best interests of investors first.