Sunday, June 14, 2009
SEC Temper Tantrum
"The [SEC] imposed tough new rules on stock trading by employees, following an investigation into the trading of two veteran enforcement lawyers. The rules will, for the first time, prohibit staff from trading shares of companies under SEC investigation regardless of whether employees have personal knowledge of the investigation. Staff will also be required to have their brokers supply trading statements so that ethics officers can confirm that employess reports are accurate. ... The report didn't name the two [SEC] employees. The [WSJ] has identified them as veteran SEC lawyers Glenn Gentry and Nancy McGinley. ... 'Oh yuckola!' Ms. McGinley wrote in a 2007 email, according to the report, when SEC rules blocked her friend from making a trade. ... The SEC has come under fire for missing risky transactions at big Wall Street firms during the boom years and failed to catch confirmed Ponzi schemer Bernard Madoff, among other things. Ms. McGinley's lawyer, Adam Augustine Carter, confirmed that his client is the subject of a probe and said she did nothing wrong. ... The lawyer said those trades took place either before any SEC investigation started, or after the investigation was 'publicly disclosed and widely discussed in the press.' ... The two were active stock traders compared with others at the agency, officials say, and they filled out most of the required paperwork, though with some lapses. For example the SEC report said, Mr. Gentry failed to file forms for three stock transactions. The inspector general also found that both failed to report certain cases where they earned more than $200 in income, as rules require", my emphasis, Kara Scannell at the WSJ, 23 May 2009.
This looks like an SEC witch hunt designed to derail an investigation of significant malfeasance somewhere else.The SEC complains of limited resources, yet looks at these two lawyers. As little as a $200 a trade profit might be at stake. Is $200 Lloyd Blankfein's daily cigar bill? This case illustrates one of the SEC's many failings, an emphasis on form filling while ignoring subsantive issues. SEC "ethics officers"? Hahahahahaha, the Mogambu Guru would say. Three transactions. Wow. Did any of them show even a $1,000 profit? I cite a maxim of jurisprudence, California Civil Code Section 3533, "The law disregards trifles". David Kotz, SEC IG, study up. What did you learn at Cornell Law School anyway?