Financial Gatekeepers and Investor Protection:
Evidence from Criminal Background Checks
Law & Mills (2019)
, Main Question
Do financial advisors who had a criminal record before entering the
profession pose a greater risk to investors compared to those without
such a record?
The key focus is specifically on pre-advisor criminal records, that is, an
ex ante characteristic observable before hiring.
, Contribution
The authors show that:
A criminal record prior to entering the profession statistically predicts:
future customer complaints,
arbitration cases,
large financial settlements,
and investors do not receive any compensating benefits (neither higher returns
nor lower fees).
In other words:
An ex ante characteristic predicts ex post investor harm.
Evidence from Criminal Background Checks
Law & Mills (2019)
, Main Question
Do financial advisors who had a criminal record before entering the
profession pose a greater risk to investors compared to those without
such a record?
The key focus is specifically on pre-advisor criminal records, that is, an
ex ante characteristic observable before hiring.
, Contribution
The authors show that:
A criminal record prior to entering the profession statistically predicts:
future customer complaints,
arbitration cases,
large financial settlements,
and investors do not receive any compensating benefits (neither higher returns
nor lower fees).
In other words:
An ex ante characteristic predicts ex post investor harm.
