Women in U.S. finance face harsher misconduct discipline than men, 'bad broker' research team finds

NEW YORK (Thomson Reuters Regulatory Intelligence) - Women involved in securities-industry disciplinary actions are significantly more likely to be fired than their male counterparts, according to a study released March 13 by the research team that last year drew wide attention to “bad brokers” who remain in the securities industry after being fired for misconduct.

The feet of brokers are seen during metal price trading on the floor of the London Metal Exchange in London January 7, 2004.

Women charged with misconduct face more dire consequences than men even though they are three times less likely to be cited for misbehavior on the job. One in 11 men in the finance industry have been cited, compared with one in 33 women.

The gender gap shows up even when brokers are shown the door by their employers. Severance packages are substantially higher of men than women. The study by researchers from Stanford, the University of Chicago and the University of Minnesota found that female advisers are 20 percent more likely to lose their jobs and 30 percent less likely to land new jobs than male advisers.

The study was published by the Stigler Center for the Study of the Economy and the State at the University of Chicago’s Booth School of Business


The study, titled “When Harry Fired Sally: The Double Standard in Punishing Misconduct” comes just a year after the same team of researchers released a widely-cited study showing many brokers and some firms have a marked tendency to hire such advisers. The team’s prior study became an issue during Congressional hearings into finance industry practices that led to calls for enhanced regulatory oversight by securities agencies.

The new study lends support to earlier research findings on the difficulties women face in the financial services industry, where they make up a relatively small percentage of wealth managers and even fewer positions in top management. The low representation of women in finance has persisted in the industry even as women have surpassed men as the largest owners of investment assets, owing to their increased presence in the workplace and longer average life spans.

“Although both female and male advisers are disciplined for misconduct, female advisers are punished more severely,” the study concluded,. “Following an incidence of misconduct, female advisers are 20 percent more likely to lose their jobs and 30 percent less likely to find new jobs relative to male advisers.”


The study adds that “evidence suggests that the observed behavior is not driven by productivity differences across advisers.” Women are punished more often and rehired less at firms regardless of financial performance, especially at firms or branches that have higher numbers of men as executives and owners.

The findings suggest that the favoritism, instead, is “taste-based discrimination.” Men appear to prefer hiring other men. They also are more likely to blame women for problems, since “disproportionate share of misconduct complaints is initiated by the firm, instead of customers or regulators.”


The study, which breaks down reports into individual firms, singled out Wells Fargo as one of the major firms that fires 25 percent more female employees than male ones with similar work profiles. For a firm still trying to recover from allegations of an incentive program that spawned bad behavior in the opening of millions of falsified account openings at branch banks, the study pointed to another area of concern. Reuters Regulatory Intelligence was unable to immediately reach the firm for contact. But Wells told Fortune (here), that “We will continue to focus on providing a diverse and inclusive work environment where all of our team members can thrive.”


The researchers said that while gender inequality is often studied in the context of hiring discrimination and salary, there has been little academic research on the topic of firing and discipline imbalances. It said the brokerage industry offered a “unique” chance to study the phenomenon because of the availability of public information on work force management.

Gender differences in punishment speak to the broader idea that female employees have less leniency for missteps than their male counterparts, the researchers said. “This aspect of discrimination has received little attention in academia or in policy. One possible reason is that such discrimination is less likely to draw attention than the wage gap.”

The study was done by Mark Egan of University of Minnesota, Gregor Matvos of the University of Chicago and Amit Seru of Sanford. Their study drew upon similar data to the bad broker problem last year. The study covered reports from the Financial Industry Regulatory Authority data on disciplinary actions, and used GenderChecker software to correlate the data with based on gender, which the FINRA data does not break out. The sampling includes the 1.2 million people registered through FINRA covering the 10-year period ended in 2015. The researchers cited data showing that three-quarters of brokers are male.

- Study by researchers from Stanford, the University of Chicago and the University of Minnesota: here

(Richard Satran is a financial journalist covering daily and emerging issues for Thomson Reuters Regulatory Intelligence.)