Men Are More Easily Forgiven for Financial Wrongdoing

Given that fewer than 10 percent of the CEOs and CFOs in the financial-services industry are women, it’s not exactly news that there’s a gender chasm on Wall Street.

Research finds that not only do women have a more difficult time getting ahead on Wall Street, they have an inordinately harder time getting past a misstep.

University of Minnesota’s Mark Egan, Chicago Booth’s Gregor Matvos, and Stanford’s Amit Seru scoured the misconduct records for more than 1.2 million financial advisers between 2005 and 2015. Women disciplined for misconduct were 20 percent more likely to lose their jobs and 30 percent less likely to land a new job in the industry within a year, relative to their male counterparts.

“Although both female and male advisers are disciplined for misconduct, female advisers are punished more severely,” the researchers write. “The financial advisory industry is willing to give male advisers a second chance, while female advisers are likely to be cast from the industry.”

The repercussions for misconduct were harsher for women even though men were three times more likely to have at least one record of misconduct on file with the Financial Industry Regulatory Authority (FINRA)—9 percent versus 3 percent—and twice as likely to be repeat offenders.

Only in companies where women made up at least a third of management roles was misconduct handled the same way for men and women.

Male misconduct also costs firms more: the median payout for a settlement or damages was $40,000 for male financial advisers and $32,000 for women hit with a misconduct charge. Are firms willing to look the other way because men behaving badly are more likely to be rainmakers? The researchers say no. “We find no evidence that females are substantially less productive employees,” report Egan, Matvos, and Seru.

If there’s an institutional code of silence among financial advisers, it extends less protectively to women. In an industry where three out of four advisers and more than 80 percent of managers or owners are male, 44 percent of the misconduct charges brought against women came from within the firm, compared to just 28 percent of male misconduct charges, the study finds.

And once a charge is leveled, the male-dominated management ranks seem to follow a boys’ club ethos. “Firms with a greater percentage of male executives/owners at a given branch tend to punish female advisers more severely following misconduct and also tend to hire fewer female advisers with a past record of misconduct,” report the researchers.

Indeed, among firms with no women in management or ownership, female advisers with a misconduct demerit were 42 percent more likely to stop working at the firm, compared to male counterparts at the same branch who also had a misconduct record.

Only in companies where women made up at least a third of management roles was misconduct handled the same way for men and women.

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