Curious to hear what area of finance people believe to be the least ethical (or moral). I don't think I am being bold in saying that there are plenty of shady "grey areas" in Wall Street's neck of the woods. While I am not smart enough to opine on the topic, thought I would leave it up to the forum to discuss. Thanks
**Note: I guess I am not really interested in specific one off cases, rather systemic/underlying issues
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Wall Street is very ethical given the fact that they are the most regulated industry in the US. I would say some areas of credit (distressed debt, direct lending, RX) can be very litigious and even unethical. In broader finance, predatory lending is as unethical as it gets.
Being regulated =/= being ethical. You could easily follow all regs and still be unethical.
you could also say an industry that is naturally ethical doesn't need to be regulated (or the inverse, the most unethical industries are the ones that require the most regulations)
Distressed debt / vulture funds hands down
Mike Milken would know
A lot of the public market, especially smaller cap companies and banks who sponsor SPACs in a sense act unethically. Some companies are elaborate stock promotions and for them to exist they need bankers willing to help them IPO or despac. There is so much money in the public markets and with many retail traders someone’s getting scammed out there.
Any pharmaceutical company/product that Shkreli touched.
There’s nothing Shkreli did that the big pharma guys aren’t guilty of and get away with
HR and sustainability.
100% the SPAC guys that take advantage of retail. It’s sad seeing normal people lose money.
What do you mean by retail?
Retail investors refers to “everyday folk”. Typically investors with a net worth less than $1MM and annual income less than $250K (although these numbers slightly vary). Basically people who won’t be able to recover from significant market losses.
100%, anyone who "preys" on retail.
Will add the newsletter authors / Twitter gurus / promoters pumping shitty micro caps with guaranteed returns
I thought they are cracking down on individuals regarding this online?
Add Citadel and PFOF to that list then!
Investment bankers. Especially independent sponsors they do some shady shit with employees
ESG, unironically
Exactly, ESG is just another fascist tool for the left to push their idealogy into business and culture.
ESG is a massive grift and a cover for authortarian consolidation. It is astroturfed as fuck and there are state actors pushing it behind the scenes.
It has very little to do with actually improving the world or helping anyone at all.
Correction here, it has nothing to do with improving anything and everything to do with consolidating power with capital managers that don't even have their own skin in the game.
How is investing in stocks that have a good environmental, social, and governance score worse than some of the other examples of immoral behavior in finance that cost people their jobs and livelihoods?
ESG is inherently a small government/conservative way to solve ethical issues in business. Generally the liberal approach would be government regulation and taxes while the conservative approach would be to let the free market solve it by not investing in those companies. But I guess it’s evil because it makes people who donate to right leaning politicians a little tiny bit poorer!
Insider trading at Hedge Funds.
10000000% real estate. I can think of justifiable arguments for basically every other area of finance, but these guys are just the worst - especially the residential guys. Preying on people who just want to find a place to live, jacking up prices and rent figures to levels that far exceed “reasonable”, rationing inventory into the market to create demand, the list goes on and on. Notwithstanding the fact that people who work in real estate are generally huge sleazelord shit bags to begin with.
Sleaziest I ever encountered were the NYC rental agents. I probably went through 5 separate bait and switch interviews for places. They lie through their teeth and will do anything to get the broker fee.
It’s not much different than PE tbh. Acquired EBITDA / add on roll ups mean half the staff gets fired because synergies, or duopolistic sectors with insane pricing power increasing margins via price increases, etc. heard a couple groups bragging how they were able to use the cost input/inflation excuse to raise prices more than the price of the actual cost input increase
Sigh. It’s always the guys who couldn’t get into IB (never mind elite IB like FT Partners) that have to resort to real estate. I feel bad for them, all they know how to do, even as a mid level employee, is browse zillow 😢😞🥺
Reminds me of this. Dude is literally an evil genius. Could be using this intelligence to cure cancer or something, instead is using it to jack up residential prices.
Seriously? You think the RE guys are worse than the derivatives people? At least real estate is real.
Your Internal Audit department would like a word with you . . .
.
I'm surprised to see this here. Commodity markets are so massive that one would think that doing unethical items/transactions just wouldn't make sense. Can you explain this further?
yeah, I feel like if anything that commodity markets are good things since it allows products to go to market
Glencore at the very least seems to have had a pervasive bribery thing going on.
Read The World For Sale by Javier Blas and Jack Farchy for some wild examples. Commodities are unregulated and deal with emerging and frontier markets where corruption is more prevalent/necessary to get deals done.
IMO, gotta be the payday loan guys. They are effectively bankers for the lowest portion of our economic ladder, and take full advantage.
this is the 100% correct answer for 'low' finance work. Things like that are deceptive and make the poor stay poor instead of helping them rise out of it.
Equity Research
Username checks out.
hahahhahahaha
Anything where the business model hinges on non-compete clauses?
Crypto traders that pump and dump shitcoins. If it was any other security they’d all be in jail (for good reason)
Debt buyers. An example is publicly traded PRA Group. They essentially buy outstanding consumer debt for pennies on the dollar from other firms and finesse ways to collect on the debt. A lot of the time with threats of litigation. This doesn't mean I'm opposed to people paying their debts and the necessary job of debt collection, but it should be done ethically. Here are some excerpts from wiki:
Litigation[edit]
In 2014, the Attorney General of New York obtained a settlement against PRA "for repeatedly bringing improper debt collection actions against New York consumers."14 The case involved "uncontested default judgments" levied against defendants who failed to respond to suits brought by PRA against them.14 The settlement required abandonment of claims against debtors (amounting to millions of dollars), changes in collection practices, and a civil fine of US$300,000.14 In September, 2015, the Consumer Financial Protection Bureau, the regulator of the debt buying industry, made public a Consent Order against PRA, which was detailed in PRA's 2015 Annual Report to the SEC. As part of the Consent Order, PRA received a substantial fine and penalty, and must make restitution to some of its customers due to a variety of questionable debt collection practices.
Adverse regulatory actions[edit]
In September 2015, The Consumer Financial Protection Bureau (CFPB) ordered a subsidiary to pay $19 million in consumer refunds and an $8 million penalty, and stop collecting on over $3 million worth of debts. The CFPB found that the subsidiary:
Private equity is partially to blame for the destruction of the middle class and deindustrialization.
After them, payday lenders and other usurious institutions.
It is an really interesting point given that countries that have continued proud manufacturing (high tech and otherwise) like Japan and Germany both do not have as insanely large PE industries as the US, everything else being equal. To go one further, I'd be curious to find out if there is a correlation between possible relative lack of PE investment/ownership of Midwestern firms (where many Germans moved to and started businesses) and higher (formerly at least with pre-Rust Belt) manufacturing output.
You are just scratching the surface of it, but you are directionally right.
There is also far lower high-tech development in Japan and Germany. Software industry is a miniscule fraction of that of the US, and practically zero AI advancements fwiw. Failure to modernize their largest industries at the rate of the US, or call it slower advancement, has kept them locked in manufacturing, and I think that's a key part of the equation
I'm interested if it's possible to do something like a regime study (maybe a different type of study would be more applicable) seeing the change in manufacturing output vs. percent ownership of companies engaged in manufacturing by financial sponsors and divide it by region (Global, US (and within US: Midwest, East, West, South, etc), Europe, APAC).
I would imagine that there could be trends both in the public markets being the number of companies listed on the NYSE that participate in manufacturing in the US, as well as among all registered companies in the United States.
I'm additionally curious if there are any specific financial sponsors (Blackstone, Carlyle, KKR) or activist shareholders (Starboard Value, Third Point, ValueAct, the greatly feared Elliott, or the mysterious and petrifying Carl Icahn) that have made impact on manufacturing in the United States through board control or otherwise.
The word partially is doing a lot of work in that sentence. The rise of buyouts coincided with these trends but the causal effect wouldn't be very large I imagine. The PE industry just isn't big enough to be meaningful if you're talking about something as big as deindustrialization. There was also a paper that came out recently covered in The Economist that found that employment at firms declines after managers with MBAs are appointed which seems like a similar and more important factor than PE.
Look to things like trade or skill-biased technological changes (computers and the Internet are better for Excel monkeys than for steel factory workers) instead. There's a rich econometric literature on this question.
I agree s921 If we're being empirical, the de-industrialization of the US is most closely attributable to international economic trade agreements and the relationships between currencies. PE, as well as public, operates within those boundaries and does what it will.
People go to payday lenders because regular banks will not lend to them. Thus the regular banks are to blame as well.
Eh, not necessarily IncomingIBDreject with freedom comes responsibility. We can’t say the banks “should” be providing loans to people who likely will default naturally given their circumstances or purposefully default by just taking money without ever having the plan to pay it back. That’s where payday loans come in and mainly their reason for being. They garnish wages through access to your bank account to pull the funds from the check automatically which essentially guarantees their repayment. Philosophically you could look at pay day loaners or “financiers” both negatively or positively. Negative if their interest rate is ridiculous like above 35% (or whatever % we collectively agree is too much) or you can view them positively because this market primarily serves those who are at the very bottom of society and have no other option for cash. It provides liquidity in the face of financial difficulty. They could be using that for starting a business of their own, unexpected medical bills, bills in general, who knows. Or, and more likely the case, using it to abuse drugs, alcohol, prostitution, gambling, whatever.
That’s the thing about Capitalism, it’s a system of organization. That’s all it is. What we do to set up that system with the appropriate guard rails and how the actors of the system act across the spectrum of small time traders to large traders and those in power who regulate everybody in between, is all up to the morale of man. It’s the most efficient and liberal (old definition) system for trade there can be. How we act within this system is our faulting, not the system’s faulting.
So when you guys mention pay day loaners or account factoring shops that garnish wages and assets for a 30% interest rate (many times higher in the accounts factoring business loan space) who’s to blame? Solve that one and we’ll be much closer to an economy of purity rather than of grey area and at times corruption.
Sacklers, but that's not exactly finance. W/in finance, I kinda agree w the current rendition of ESG
Re: 3 most notably with Covid. So many other treatments and vaccines laughed off because they would not make Big Pharma rich.
It just seems like corruption and greed has been getting worse and worse. Or maybe it has been that way but just because Trump went after these groups media started to do a deep dive and start reporting on these things that had already been going on.
I’ve worked in the pharma industry directly for one of the large global players and I can tell you, there is definitely a need for reshaping that industry both in respect to innovation and regulation. It’s pretty fucked up. Best advice to anybody is just to just learn basics of medicine. Start with the question “what class of drug is this that you’re prescribing” then the next question should be “what is the mechanism of action of the drug” which basically means how does this work in my body? From there go home research the class of drug, the mechanism of action, and then the brand name he’s likely prescribing which has been influenced by that company’s sales representative. That’s pharmaceuticals. Med device is a whole nother fuckin ball game.
ESG
yeah lol look up lithium mines. Not everything considered "green" is green after all...
Rosemont Seneca Advisors
Merchant Cash Advance. Basically legal loan sharking. Really interesting stuff and if you’re on the Wall Street side you’re making a killing.
https://www.bloomberg.com/news/features/2015-10-06/how-two-guys-lost-go…
How has crypto not been mentioned
shit is literally MLM. It’s Mary Kay for bros
It was
He's not the "least ethical", but like i think someone mentioned above Chamath has taken advantage of retail investors with his blatant self promotion / cult of personality / insane amount of CNBC, Bloomberg, etc. features. I know the overall tech market has taken a nosedive, but his de-spacs are some of the worst.
https://www.newyorker.com/magazine/2021/06/07/the-pied-piper-of-spacs
Crypto/forex/sports betting/real estate and anything else that you see under the countless profiles of Insta scammers that look like the type of people you cover your drink around
Sports betting is a good one. I don’t consider it “finance” but definitely a skeezy industry
Payday loans
anyone without skin in the game, which is 99% of finance.
if you wouldn't buy it for yourself and your grandma, you shouldn't be promoting it and may you get what's coming to you. this goes for PWM, PE, IB, AM, RE, VC, SPAC, crypto, lending, permanent life insurance agents, everybody. I think there's a special place in hell for those people (if there is a hell)
Operations - you spend all day looking at porn/jerking off
that's pretty sinful
not strictly finance, but what McK did with purdue pharma, facilitating the oxycontin epidemic, is outright criminal
guarantor lending
"if your credit score is really bad, get someone to vouch for you (pay if you default) and we'll give you a loan at 40% annual interest rate"
basically loan sharks
I had a part-time jobs translating phone calls in a market where the company's subsidiary did this. People really often cried because it's usually friends screwing over friends or an indebted son puts down his retired grandpa as guarantor and the grandpa is actually really poor as well. The company also harasses people with regular phone calls if they're late on payment schedule and scares them with litigation.
"You signed a contract, if you don't pay us, we will go to the court and a notary will decide whether we can sell your house and collect our payments"
Absolutely heartbreaking. The founder of this company is a rags-to-riches story with a net worth of like $500m.
whats his name
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