Two Years After Dodd-Frank, Has Wall Street Changed?

16 percent on Wall Street would engage in insider trading if they knew they could get away with it.

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Ever since the bigwigs heading Wall Street's biggest financial firms helped bring the global economy to its knees back in 2008, the government has been instituting all sorts of regulations to make sure behind-closed-door dealings don't blow up the economy again.

But on the eve of the second anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act, are all these new rules designed to keep Wall Street on the straight-and-narrow working?

It would appear not, at least according to a report released this month that shows shady ethics remain rampant and widespread in the industry.

To be sure, Wall Street certainly isn't known for a squeaky clean image when it comes to ethics. Still, almost a quarter of executives see bending and breaking the rules as a key to success, according to a survey released this month by whistleblower law firm Labaton Sucharow, an "alarming" figure according to the firm.

The survey, which polled 500 senior executives in the United States and the U.K., also found that 26 percent had observed or had firsthand knowledge of wrongdoing in their workplace.

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Perhaps most shocking, almost a third of respondents felt pressured to break the law or compromise ethics based on compensation plans and the prospect of bonuses. About 16 percent would actually commit a crime—insider trading, for instance—if they knew they could get away with it.

"The financial services industry, its moral compass is broken," says Jordan Thomas, partner and chair of Labaton Sucharow's whistleblower representation practice. "Until these organizations re-establish a culture of integrity and stewardship, investors are at great risk."

But Wall Street isn't likely to do so without a stronger nudge from regulators, Thomas says.

"The heart of it is within the organization, but law enforcement authorities—with additional resources—have the ability to drive change," he says. "[Regulators] need to police the beat more aggressively until the organizations re-establish that culture of integrity and stewardship."

Still, regulators and law enforcement can only do so much in the face of a "culture of silence" that encourages employees to keep mum about dodgy dealings at their firm. Despite the fact that 94 percent of those surveyed said they would report wrongdoing given the protections offered by the Securities and Exchange Commission and other financial regulators, fewer than half knew of the programs or how to report misdeeds. But their help is key, Thomas says.

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"They aren't mind readers. They can't predict the future. They can't see into every organization," he says of regulators. "The heart of the solution is within the organization."

Transparency has long been an issue in the financial services industry, which has invented increasingly complex financial products in recent years. Some of those same products—including subprime mortgages and derivatives—were blamed in part for the near-collapse of the world's financial system.

But not everyone thinks just tacking on more and increasingly restrictive rules is the way to fix Wall Street's conscience problem. Making trades, open positions, and other financial dealings part of the public record would go a long way in ensuring that financial services execs are a little more scrupulous, according to some.

"We believe that transparency is a real alternative to regulation and it can be much more effective and much less costly," says Michael Borland, compliance officer and general counsel at financial services firm OANDA. "If one of the objectives [of Dodd-Frank] is to instill a higher level of business ethics, of trust, honesty, and transparency, rules can only go so far."

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To that end, OANDA, an Internet-based forex trading and currency information firm, publishes all of its open positions online, minus the client's name.