In an interesting speech, SEC Chairman Mary Shapiro stated that she believes securities violations are often the result of peer pressure and not individual greed.
Chairman Shapiro was referring to the recent guilty verdicts in the Galleon insider trading matter, as well as numerous other insider trading convictions. Chairman Shapiro seemed to suggest that individuals are engaging in insider trading to “return a favor,” or enhance their reputations in their businesses. Further, she claims that the penultimate approach to performance is a motivating factor for many, and the old adage that “everybody was doing it” is a driving force.
Although Chairman Shapiro seems to sincerely believe her words, this may be an overly simplistic approach to insider trading. Many individuals, who have been convicted, earned large sums of money, and it is unlikely that they were solely motivated to increase their reputational standing or that they were returning favors to friends. At the very least — or to be as generous as possible to Chairman Shapiro — peer pressure may play some part, but the overwhelming evidence seems to suggest that the pursuit of money plays a much larger role in insider trading.