Polls: Scandals Eroding Investors’ Confidence

A pair of opinion polls released Thursday indicate that two years of scandal are eroding investors’ confidence in Wall Street.

A Gallup survey said 26% of U.S. investors are “less likely” to invest in mutual funds following disclosures of widespread improper trading at money-management companies.

The poll, released at the annual conference of the Securities Industry Assn., also said 70% would consider moving their investments out of funds named in an investigation. About 20% said they “definitely” would move out of a fund under investigation, said Frank Newport, editor in chief of the Gallup Poll. The survey of 500 investors, with a margin of error of about 4.5%, was completed Wednesday, he said.

In another poll, conducted for the SIA, Wall Street’s main trade group, 43% of investors said dishonesty was the biggest issue facing the securities industry. That’s up from 41% in 2002 and 8% in 2001.

“While we have seen signs of market and economic improvement, we have had limited success in regaining investor trust,” Morgan Stanley’s John Schaefer, outgoing chairman of the SIA, told the group’s members.

Among reasons for eroding trust in the industry are the scandal now enveloping the mutual fund industry over improper trading practices; the charges that brokerage firms misled investors by providing biased stock research, which led to a $1.4-billion settlement with Wall Street firms; and the ouster of New York Stock Exchange Chairman Richard Grasso after the disclosure of his outsized compensation package.

The survey was conducted by Harris Interactive, which polled 1,504 investors with financial assets of at least $100,000. The interviews took place between Aug. 22 and Sept. 16.