Friday, February 20, 2009

SEC at Large

"The [SEC] is investigating whether Apple committed securities fraud by failing to inform the public about CEO Steve Job's health. This investigation exemplifies how the agency has run amok. ... Mr. Jobs met persistent inquiries with a snippy, 'Why don't you guys leave me alone? Why is this important?' ... His health was surely material information for investors. And under federal securities laws, it is a serious felony--securities fraud--for corporate officers to disseminate false material information, or to fail to disclose true material information related to the company's financial prospects. ...But while the legal meaning of 'materiality' has long been the subject of dispute and little regulatory definition, it should not dictate that corporate officers have no right to privacy. ... The SEC's investigation is the latest in a long history not only of incompetence, but it connivance with Department of Justice prosecutors", my emphasis, Harvey Silverglate (HS), at the WSJ, 2 February 2009.

"A UBS AG investment banker, a former co-worker, a family friend and a former classmate have been charged criminally in an insider-trading case that allegedly reaped more thean $7 million in illicit profits. ... On Thursday, the [SEC] separately brought civil charges against seven people in the matter", Chad Bray at the WSJ, 6 February 2009.

"The new chairman of the [SEC] pledged a crackdown on fraud and announced changes aimed at speeding up inquiries and reaching tougher settlements. ... Schapiro said she wants to improve audits at privately held brokerage firms and promote safe custody of customer assets. Also, Friday, the SEC announced that David Becker, a partner with Clearly Gottlieb Steen & Hamilton LLP [CGSH], was named the SEC's general counsel, a post he earlier held from 2000 to 2002", Kara Scannel at the WSJ, 7 February 2009.

"Former federal prosecutor Robert Khuzami will be named the new head of enforcement at the [SEC], as soon as this week, a person familiar with the matter said, in the latest bid by the SEC's new chief to restore its credibility. Mr. Khuzami, currently a top lawyer at Deutsche Bank AG in New York, was offered and accepted the position of enforcement director, this person said. ... The appointment of Mr. Khuzami, a respected prosecutor who served as chief of the securities fraud unit at the U.S. attorney's office in Manhattan, is part of SEC Chairman Mary Schapiro's effort to reinvigorate the enforcement division", Kara Scannell at the WSJ, 9 February 2009.

I agree with HS, the SEC should drop this. HS in an attorney and author in Boston. What, the SEC and DOJ can't be trusted?

While the amount involved, $7 million, exceeds my "Blankfein test", I think the SEC and DOJ should drop this too, and focus on more significant matters, like: are Citigroup's books cooked?

Will Schapiro have the same firm that audits Citigroup audit brokerages? She brings Becker back. The SEC-BigLaw revolving door, revolves once more. From his resume at CGSH's website, "David M. Becker ... focuses on SEC and other investigations, internal corporate investigations, corporate governance issues, and on a broad range of SEC regulatory matters. ... Becker was particularly active in advising the Commission on matters related to corporate governance, and accounting and disclosure. ... Becker received a JD degree from Columbia ... in 1973, and an undergraduate degree from Columbia College in 1968". Oh goody, Becker has two Ivy League degrees. Harvey Pitt was SEC chairman from 2001 to 2003. Think about that. My take: it's open season for accounting fraud at the SEC.

If selecting a former AUSA from the SDNY US attorney's office, currently with a NY BigBank, is Schapiro's attempt to "reinvigorate the enforcement division", I don't want to know what she thinks will emasculate it. Laugh, Schapiro made a joke.

Junior at Jr. Deputy Accountant, 5 February 2009, advocates the SEC be abolished, link: Junior calls me a "brutal critic" of the SEC. Guilty as charged. I am not ready to kill the SEC, yet, unlike the Fed which I would have been buried decades ago. At least in theory, I stress, in theory, the SEC, unlike the Fed, could do more good than harm, if it was the "least cost provider" of information used by the market to price securities. This is theory. I await a study which would convince me the SEC ever paid for itself. At least, the Obamaites should arrive at the SEC with GSG's CNC guillotine, cutting heads left and right and admonish those staffers, each of whom still has his head: pay for yourself or get out! Make annual personnel decimation Uncle Sam's policy with regard to the SEC.

1 comment:

Anonymous said...

SEC = "least cost provider" of information used to price securities... + + + + + + (plus)

The markets are corrupt because there is "ring-fenced information"... look at CDS... zip market data other than dealer provided stuff... ha ha ha...

I few more rounds of the SEC/BigLaw Revolving Door and the markets will be permanently frozen... ice cold.