As a young hedge fund analyst in New York City, Tom Hardin made a series of poor decisions that led him into the world of insider trading. “I didn’t wake up one day intending to commit a crime. I was a 20-something analyst trying to prove myself in a high-stakes, high-pressure industry,” he says.
Like many in finance, Hardin was chasing “performance, reputation and the illusion of success”. Slowly, he started making compromised decisions, cutting corners in ways he convinced himself were harmless. In Hardin’s case, the tip that ultimately got him in trouble concerned the acquisition of Kronos, a software company, by the private equity firm Hellman & Friedman – information that wasn’t yet public. “I made trades knowing the stock would likely spike and it did. I profited. But the guilt and the fear set in quickly,” he says.
In 2008, the FBI showed up at his door. Hardin was charged with securities fraud and faced prison time. But, as part of a cooperation agreement with the US Department of Justice, he became an informant.
For the next two years, Hardin – code-named Tipper X – wore a covert body wire to help expose and build conviction cases against those guilty of insider trading in one of the largest sting operations in US history: Operation Perfect Hedge. The investigation led to over 80 investment professionals being convicted between 2007 and 2012.
Hardin was later invited by the FBI to share his story with their rookie agents, which launched his career as a corporate trainer and board adviser on behavioural ethics and compliance.
“When it was over, I had a choice. I could either hide in shame or use my story to help others understand how good people can end up making terrible decisions – and how to recognise the warning signs before it’s too late.”
A slippery slope: it starts over coffee
Contrary to popular belief, insider trading isn’t always a grand conspiracy. It is deceptively easy, according to Hardin, often starting over coffee or during a casual conversation at an industry event. “That was my world, people sharing ‘market colour’ or tips that often blurred into material non-public information,” he explains.
Sources of material non-public information (MNPI) include corporate insiders, such as executives, board members or external advisors, bankers and lawyers. In Hardin’s case, information often passed informally, through friends of friends or a contact at a research dinner. “Trust-based networks allow this kind of behaviour to persist,” he says. “People trade tips, expecting future favours. These relationships thrive on loyalty and silence, especially in tight-knit hedge-fund circles.”
Typically, 10% of all your employees are morally incorruptible and 10% are a compliance nightmare
An ethical breach is rarely driven by a single factor. It’s typically a combination of personal and environmental circumstances, such as a weak compliance culture, pressure to perform, greed and opportunity. “The finance sector is especially vulnerable to these pressures,” Hardin says, where falling short of targets can cost someone a bonus, their reputation or even their job.
“In my case, it was a combination of insecurity, fear, ambition and pressure. I was afraid of falling behind or not being enough and I rationalised it by thinking ‘everyone else is doing it’,” he says. “I told myself it was just one trade, that it didn’t hurt anyone. When you’re handed MNPI and believe you won’t get caught, the temptation can be overwhelming.”
Even well-intentioned professionals operating in high-pressure, high-performance environments can find themselves crossing the line. “Typically, 10% of all your employees are morally incorruptible and 10% are a compliance nightmare. But that middle 80% can be swayed either way,” Hardin says.
Firms must recognise how easily misconduct can happen and how small ethical lapses become normalised over time. This is what Hardin calls “ethical drift”, which he says is particularly rife in the current economic climate.
The perfect storm: global uncertainty elevates behavioural risk
Geopolitical tensions, market volatility and the rapid pace of technological advancement is elevating behavioral risk inside organisations.
“Economic volatility creates desperation,” Hardin says. “In 2008, I saw people grasp for any edge just to stay afloat. That same desperation exists today. Employees may feel justified cutting corners to meet expectations or keep their job.”
Political instability can also signal that rules are flexible and never has this message been so blatant. US President Donald Trump is currently facing accusations of market manipulation, after posting on social media that it was a “great time to buy” just hours before pausing tariff impositions and subsequent share jumps. This sets a dangerous precedent, according to Hardin. “When leaders act with impunity, it undermines shared ethical norms,” he says.
Trump’s tariff flip-flop has revived a push to ban members of Congress from trading stocks, given their access to critical information before it goes public. “Political intelligence trading is rampant,” Hardin says. “Markets have swung dramatically based on whether tariffs were being imposed or lifted. What’s troubling is that, shortly before some of these public announcements, traders have observed unusual spikes in option activity.”
This kind of government-sourced MNPI lives in a legal grey area, Hardin explains, but it presents a very real risk. Whether it’s advanced intel on tariffs, sanctions, regulatory actions or interest rate moves, the financial advantage is significant. When that information is obtained improperly, it raises the same ethical and legal concerns as classic insider trading.
Against this backdrop, cynicism is rising, Hardin says. “Many feel the system is unfair and rigged for the powerful.”
That belief makes it easier to justify bad behaviour as a way to level the playing field. A risk that is further compounded by advancements in technology. AI is being used to inform decision-making and cryptocurrencies and decentralised finance are raising new questions around access and transparency of financial transactions. Meanwhile, the tools for hiding misconduct, such as encrypted messaging apps or burner phones, are easy to access.
“People are more disconnected and new technology means systems can be gamed,” Hardin says. “Combine that with volatile markets and economic anxiety and you’ve got a breeding ground for rule-breaking.”
When are businesses most at risk?
There are certain situations where businesses might find themselves more prone to employee risk-taking or misconduct. For example, if a company is under pressure from investors to hit revenue milestones before a possible IPO delay; an asset manager facing political scrutiny over ESG products quietly shifting messaging to please regulators without adjusting disclosures; or a sudden change in culture, such as a merger or private equity acquisition.
In this environment, the guardrails can fall away quickly. Leaders who don’t actively reinforce ethical values and embed a culture of accountability will find themselves managing risk reactively, often when it’s already too late.
Compliance isn’t a policy, it’s a behaviour
Hardin has spent the past decade delivering hundreds of presentations and training sessions to organisations on compliance. He sees organisations repeatedly make the same mistakes when attempting to create an ethical and compliant culture. “Organisations often confuse policy with protection,” he says. “They write rules, check boxes and assume they’ve built a culture of integrity. But compliance isn’t a policy, it’s a behaviour, and behaviour is shaped by the environment.”
Generic training, for example, doesn’t change how people think and act. If ethics training feels too much like a formality, employees may disregard it. This also allows firms to sidestep responsibility, Hardin says. “Ethics requires constant reinforcement, regular discussions, case studies and scenario walkthroughs. It should be done every quarter, not once a year.”
Compliance is too often seen as a barrier to commercial success. Leaders may speak about ethics but, if only performance is rewarded, that’s what people will prioritise.
“Culture is shaped by what gets praised,” Hardin says. Firms should seek ways to make it clear that integrity is a strength, not a risk. One approach is to celebrate moments when someone chooses the right path, even if it costs money. Another is to protect and destigmatise whistleblowers.
Ultimately, the onus is on leadership to set the tone and take accountability. “Executives must own their decisions, admit mistakes and talk openly about the reasons behind tough calls,” Hardin adds. “Employees take cues from what leaders tolerate.”
Ethics should also be integrated into operations and decisions. This includes building check-ins, such as asking where information came from or who verified it, and clarifying any grey areas. Many ethical breaches happen not because of malice, but ambiguity. If teams don’t know what to do with a hot tip or a market rumour, for example, they’ll make the call based on pressure, not principle.
True accountability isn’t about blame, Hardin says, it’s about ownership. “When people feel accountable for their decisions, they act differently, slow down and ask questions. They remember the human cost of crossing the line.” He advises that this type of culture builds trust, resilience, long-term success and avoids scandal.
As a young hedge fund analyst in New York City, Tom Hardin made a series of poor decisions that led him into the world of insider trading. “I didn’t wake up one day intending to commit a crime. I was a 20-something analyst trying to prove myself in a high-stakes, high-pressure industry,” he says.
Like many in finance, Hardin was chasing “performance, reputation and the illusion of success”. Slowly, he started making compromised decisions, cutting corners in ways he convinced himself were harmless. In Hardin’s case, the tip that ultimately got him in trouble concerned the acquisition of Kronos, a software company, by the private equity firm Hellman & Friedman – information that wasn’t yet public. “I made trades knowing the stock would likely spike and it did. I profited. But the guilt and the fear set in quickly,” he says.
In 2008, the FBI showed up at his door. Hardin was charged with securities fraud and faced prison time. But, as part of a cooperation agreement with the US Department of Justice, he became an informant.
