Sympathy for the devil? Extra-statutory sanction recommendations for security market violations by compliance personnel

• In Event: Fraud in Mergers and Acquisitions, the Energy Industry, and Extra-Statutory Sanctions

Abstract

Most of the fraud literature pertains to the difficulty of detecting fraud or understanding how or why it can be perpetrated. This paper adds the consideration of how fraud should be punished. We confront the possibility that people involved in the war against fraud might be excessively tolerant of it, in terms of the sanctions they recommend for its commission. Using an experimental task that manipulated fraudster motivation, fraudster history and fraud magnitude, compliance personnel recommendations are influences by several non-statutory conditions. These sanction suggestions vary by the position held by enforcement personnel but are surprisingly light across the board. Implications for research and practice are offered.

Authors

• Joseph Wall, Marquette University

• Timothy J Fogarty, Case Western Reserve University