Sunday, August 31, 2008
The SEC's Kindergarten
"If the same few companies are behind virtually every major financial scandal and meltdown, why are the regulators talking about tightening up on the rest of us? After reading the new Treasury Department regulatory proposal again, I find myself wondering whether Congress, the Treasury and the SEC are truly interested in fixing the persistent problems in the securities industry. To see what I mean, let's look at the problems we've experienced and see if there's a discernible pattern. ... None of the companies happen to be independent financial planning firms, fiduciary planners, NAPFA members or independent broker-dealers. There are no regional banks on the list either, and I couldn't find any community banks, thrifts or credit unions. ... Instead, let's focus on the companies that are on the list. Interestingly, they all happen to be major Wall Street firms and big insurance companies. They make the list again and again. ... Looking at the conflicts built into Wall Street firms' revenue models, and executive and broker incentive systems, are you surprised that no matter what rules these companies are required to follow, some firms engage in risky, predatory and short-term focused activities? ... I see nothing wrong with SEC staff members paying 3% a year for a separate account that promises, but does not deliver any individual tax management, and whose performance is chronically below the index or low-cost portfolios recommended by those indistinguishable fiduciaries. For diversification, they should load up on structured products like those 8-1 leveraged muni hedge funds that lost $2 billion for Citigroup's wealthiest customers, even though they were sold as 'conservative investments'," Bob Veres (BV) at Financial Planning, August 2008.
BV calls this his "Modest Proposal"; positively Swiftian. The Mikado's Lord High Executioner would also approve of BV's solution! The SEC will never fix anything as long as it the subject of "regulatory capture".