Society is afflicted by a bullying epidemic. Though the investment industry is made up of fine, intelligent people from Wall Street, to London, Hong Kong and other parts of the world, many can attest to being the recipient of some form of bullying. Phocion’s mission is to assist the global investment industry to elevate its operating standards, and personal behavior goes part and parcel. We want to challenge each participant to hold themselves to the highest ethical standard. Begin by reading the CFA Institute’s Code of Ethics from start to finish as an effective way to reduce bullying is through self-reflection. This article brings to light anecdotal examples of investment industry bullying and provides recommendations to combat it.
People Behaving Poorly
Bullying commonly occurs when a senior front office professional imposes his influence on a department charged with ensuring that proper internal oversight is applied (i.e. Risk, Compliance and Performance). We cite one example when a portfolio manager approached his firm’s performance department requesting the back-dating of a trade. The stock in question was sold during a period in which its price fell swiftly and significantly. The portfolio manager reasoned that the timing was “not his fault ” because “the CIO had cautioned (him) against selling it”. He therefore claimed that it would be excessively punitive for his bonus to be negatively impacted thus justifying the back-date.
Bullies can be very ambitious and often coerce junior peers to produce work that they then pass off to internal peers as their own. This obvious plagiarlistic behavior is unacceptable. The junior employee should be cited as having produced the work. At the very least a clear mention of the department that produced it should be made.
A third example is a department head that encouraged his sales force to present non-compliant client presentations in order to expedite delivery. The proper thing to do would be to implement a process that ensures that each client presentation is approved by the Compliance Department. Industry requirements for increased compliance processes and procedures is a reality for the investment industry. Entities capable of increasing automation will have a leg up on the competition.
A final example is that of a department head pressuring a new, un-registered employee to meet alone with a new prospective client in order to sell the virtues of the firm’s services. Moreover, the new employee was requested by the department head to bring the related account opening paperwork “just in case…”. The employee courageously declined the department head’s request and soon moved on to a markedly more scrupulous firm. This was the right decision as the sales and opening accounts by non-registered industry participants is forbidden. Proper procedure is to wait for regulatory registration to be approved before engaging in selling and account opening.
Bullying Creates Toxic Work Environment
Bullying can drive the receiving employee to become unsustainably anxious and prone to making error. This, in turn, heightens firm operational risks caused by human error. At time firms throw their lower level employees under the bus to align with a narrative that preserves executive bonuses. When in fact it is gaps in operations and suboptimal company culture that produces mistakes, which at times can be very costly.
All investment entities should promote a zero bullying policy, and the principles of courtesy, transparency and politeness. Employees subjected to bullying should document all questionable interactions. If things do not improve then the employee should approach Human Resources. Barring that they should simply consider leaving the firm and begin anew elsewhere.PDF version