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Minorities and Women in the Securities Industry: The Disproportionate Impact of Securities Fraud Exploitation

People of color and women have been greatly impacted whether it is as victims of fraud or underrepresented in the field as a career prospect. During an age of Black Lives Matter Protests and women speaking out against gender discrimination, the Securities sector has a great task on their hands to create prevention programs for fraud in these communities as well as revitalize inclusive practices in the employment process. It is important to address the privilege of employees or investors that may be immune or ignorant to the issues that plague the world they exist in. Creating a community that encourages employment in official board roles as well ensuring an informative environment through which individuals can protect themselves from fraud is critical for vulnerable populations.

The securities industry is not known for its diversity. It is not every day we have a “Lauren Simmons” come to the forefront of our attention, challenging the status quo of what the securities field looks like. Lauren Simmons became the youngest trader at the New York Stock Exchange at just 22 years old. She was the second black female trader of her time. It wasn't until 1952 that the first African American securities firm was founded with an NASD license. Subsequently, it wasn't until 1960 that the first Wall Street African American securities firm was opened by Phil Jenkins and Harry Wright. It took until the early 2000s for an African American to be titled CEO at a major brokerage firm namely, Stanley O’Neal. The United States Equal Employment Opportunity Commission from 2006 references that African Americans make up only 7% of the banking Subsector as well as only 4.4% of the Securities subsector. It's quite evident that the journey towards inclusivity within the Securities sector has been slow and challenging for various populations.

Similarly, women ,of any race, constitute 46.9% of the Finance and Securities Labor force according to the US Bureau of Statistics in 2018, but only make up 19.4% of the senior-level positions. Geraldine Weiss was a quintessential example of a woman trying to push past the restrictive hierarchy in place within the securities industry. No investment firm wanted to hire her in a position above secretary, although her qualifications were much greater. Immediately, once companies saw her feminine name, they categorized her caliber into a lower position which hindered her career growth. Eventually, she went by G.Weiss, so her identity remained ambiguous, which allowed her financial strategies to speak for itself, achieving above-average returns. That is just the tip of the iceberg. Muriel Siebert, Abigail Johnson, Abby Joseph Cohen, Lubna Olayan, and so many more women’s stories take an incredible amount of effort to come to the forefront of their field merely because of their gender. It is quite fascinating to imagine the strength, power, and potential of the securities industry if it looked primarily at merit and less in regards to race and gender.

An audit regarding the Representation of Minorities and Women in the SEC’s Workforce run by the Office of Inspector General(2013-2014), reveals a trend in which women and minorities received fewer cash awards or bonuses, as well as were exposed to lower performance management and recognition scores. The results of that audit suggested that various diversity initiatives within the SEC have not taken the appropriate steps or research to truly understand the barriers that currently operate in the SEC’s workplace to exclude minorities and women. The Office of Equal Employment Opportunity did not complete a thorough analysis of the inner workings that impose restrictions on equal opportunity. The Office of the Inspector General accepted that women were underrepresented at higher levels at the SEC. In addition, the rate of complaints filed in regards to equal opportunity was statistically greater by African American individuals or women. The positive aspect of this audit was a memorandum attached to the bottom indicating all the aspects of this topic that require change as well as the management response. The management was committed to data and tables of the following year as required by the Management Directive and compliance with Section 342 of the Dodd-Frank Act in order to correct hurdles to equal opportunities.

In regards to the Latino/a community, they are also blatantly underrepresented in leadership roles within the securities and financial services industry. According to the 2003-2004 Corporate Governance Study, Latinos only served on boards within 166 of 1000 Fortune 1000 Companies. Furthermore, according to the study, 15% of the United States Population is Latino/a but only 4.7% of that population work in the securities industry. The United States Equal Employment Opportunity Commission in 2006 explained that Latino officials at its highest constitute 5.1% of the Central Banking subsector while only making up 2.9% of the Securities subsector. The chair of the board of directors of the New American Alliance, Ana Maria Fernandez Har, provided an array of guidelines that would enhance Latino participation which includes actively expanding the diversity within corporate boards, launching inclusive teams, broadening hiring protocol and having current leaders emphasize the value of corporate diversity.

There are some regulations that exist within the Securities industry that disproportionately impact people of color, specifically African Americans and Latinos. The Securities Exchange Act of 1934 requires that the SEC suspend privileges, dismiss, revoke registrations, or order severe consequences for individuals that have been sentenced for misdemeanors or felonies. This is determined through fingerprints that are submitted by potential and current employees regularly. This practice can arguably be in violation of Title VII which protects employers from employment practices that unfairly impact a particular population. For example, fingerprinting specifically impacts African Americans and Latinos as they are more likely to have a criminal record due to the nature of our criminal justice enforcement practices. There are proposals for narrowing the range of the fingerprinting rule to encompass criminal records in regards to the business necessity. Incarceration negatively impacts African and Hispanic communities about 6.5 and 2.5 times greater respectively than white individuals.

The United States Equal Employment Opportunity Commission from 2006 quite explicitly states that out of the thousands of jobs that exist within the various sectors of the financial services industry, participation of women and minorities linger anywhere between 47.3% and 0.1% in top-level roles namely officers as well as managers. The Securities industry consistently has the lowest percentage of inclusion when compared to the other subsectors(banking, insurance, funds, central banking) regardless of the roles or races being discussed. This quite evidently puts into perspective how complex the path may be to the securities industry for a person of color or woman, as well as even more relevant for those that identify as LGBTQA+.

While from an employment perspective, encouraging diversity is crucial, it seems that even from an investor standpoint people of color are more likely victims of securities fraud than white individuals. According to the Federal Trade Commission, African American and Latino populations under-report fraud, despite the statistics revealing that securities fraud is more likely to impact these communities. These populations and demographics are often impacted by fraud targeting their income and debt. Misleading work from home offers, affinity fraud, pyramid schemes, business ventures to make use of people’s desperation to work, debt relief, mortgage relief, and other schemes that profit off of an individual’s financial insecurities. In addition a lack of sound financial backing could mean that those aforementioned vulnerable populations would be unable to take a legal case forward. In a report to Congress by the Federal Trade Commission from 2016, it indicated that about 10.8% of the United States population had been defrauded, which equates to over 25 million people. The purpose of this report was to design various strategies that would reduce fraud in African American and Latino communities and ensure preventative methods. These methods must motivate financial regulatory institutions to closely understand the hurdles that make African American and Latinos more susceptible to fraud, as well as begin reversing that unfortunate reality.

Malecki Law is dedicated to protecting the justice and equality of vulnerable individuals that are negatively impacted by fraud. The firm will continue to strive for favorable results for individuals that are disproportionately impacted by schemes and fraudulent financial practices. Ensuring a vocal, progressive and inclusive workspace is a crucial priority for us as a team. For over two decades, Malecki Law has upheld a fair and equal workplace as well as committed itself to ensuring favorable outcomes for ALL of our clients. We stand by and inclusive measures, fraud prevention programs or informative workshops that are compatible with the values of our firm for the purpose of protecting both employees and fraud victims of all backgrounds.

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