In 2008, Bernie Madoff, former NASDAQ chairman and Wall Street investment advisor, was arrested for orchestrating a $65 billion Ponzi scheme—the largest in history. But in addition to Madoff, a senior partner of the accounting firm that his fund used was also convicted. “Bernie Madoff doesn’t do crimes on his own—he must have someone to help,” Dr. Ben emphasized. And earlier, in 2006, allegations surfaced that Apple’s then-CEO Steve Jobs had received backdated stock options, which led to an over 10-million-dollar SEC settlement in 2007. Dr. Ben specifically pointed to Apple’s former general counsel, who directed staff to falsify documents, and CFO, who neglected to share important details with external auditors as key intermediaries that were later convicted. These examples illustrate how systemic weaknesses and professional complicity enable financial misconduct. At Sasin Research Seminar, Dr. Ben Charoenwong, Associate Professor of Finance at INSEAD, makes a case that financial misconduct rarely occurs in isolation. His research demonstrates how financial intermediaries—specifically broker-dealers—play a critical role in enabling certain types of executive misconduct. Dr. Ben’s research paper, Broker-Dealers and Executive Private Benefits: Evidence from Tax-Saving Stock Gifts, co-authored with Hansol Jang and Yibin Liu of NUS Business School, focuses on the role of broker-dealers in facilitating the backdating of insider stock gifts. Past research (Yermack, 2009 JFE) showed that insider stock gifts to the executives’ own foundations appear suspiciously well-timed. Executives tend to gift stock right before prices drop, raising questions: Are these gifts coincidental, or are they strategically backdated to maximize tax deductions? Dr. Ben builds on this by examining how corporate governance rules impact insider trading profits. He found that executives may trade off personal profits for private benefits of control worth approximately €250,000, with a conservative lower bound of €15,000 (Cziraki and Gider, 2021 RF). Dr. Ben focused on a regulatory change in 2011 began mandating internal controls testing for broker-dealers, enforced by the Public Company Accounting Oversight Board (PCAOB), which differentially affected firms that newly registered to the PCAOB due to a previous exemption expiring. This shift allowed researchers to study how increased oversight impacted backdating practices. The findings were striking: stronger internal controls and recordkeeping requirements effectively eliminated backdating activity among the treatment firms. The research highlights that the impact of these regulatory changes was strongest among broker-dealers that offered more services (e.g., tax planning, investment advice), had a higher proportion of employees with complaint histories, were non-publicly listed, and maintained long-term relationships with auditors who had fewer clients. “In other words,” said Dr. Ben, “auditors are probably not very effective as external governance mechanisms if your firm is their biggest or only client since they want to keep that relationship.” Dr. Ben outlined the steps in typical backdating schemes. The executive and broker-dealer can coordinate to select a past date when the stock price was higher. Backdated documents are prepared to reflect the earlier, more favorable date. The recipient charity acknowledges the backdated gift. This allows executives to claim larger tax deductions, while broker-dealers benefit from continued business. However, post-2011 reforms required time-stamped records, which made backdating significantly harder. These PCAOB regulations forced broker-dealers to improve recordkeeping (accurate, timely maintenance of trade and client records) and change control (documented IT and business management approvals). Using a “back-of-the-envelope” estimate, the research suggests charitable giving fell by almost 70% among executives using affected broker-dealers. Executives previously gained an average of $103,000 per year in tax benefits through backdated gifts. Twelve percent of insider transactions involved these broker-dealers. The estimated tax revenue recovery is $181 million per year (1,756 transactions × $103,000). Total charitable giving in the sample was estimated at $15 billion, with $1.79 billion linked to affected broker-dealers. A 70% reduction in that segment suggests a drop of approximately $1.25 billion in charitable giving—driven not by less generosity, but by tighter regulations limiting tax-driven motives. Dr. Ben’s research reveals the critical role of broker-dealers and internal governance mechanisms in enabling or deterring backdating. His findings emphasize the importance of external oversight, strong audit standards, and transparent recordkeeping in protecting markets from subtle but costly forms of financial misconduct. The research also raises a thought-provoking question: If charitable giving is largely driven by tax breaks—how charitable is it, really?