Wednesday, April 21, 2010
SEC, Investors Friend, Fiend?-4
"The [SEC] joined 12 Wall Street firms in seeking to scrap a key portion of a landmark 2003 deal that put strict curbs on stock analysts, a move that could heighten the ongoing debate about a broad overhaul of the financial-regulatory system. ... The proposal would have allowed employees in investment-banking and research departments at Wall Street firms to 'communicate with each other ... "outside the presence" of lawyers or compliance-department officials resposible for policing employee conduct--an activity strictly prohibited by the settlement'. ... After the bust, it was revealed that many of those analysts were touting stocks at the behest of their firms' investment-banking operations, which were profiting from initial public offerings. One solution to the conflict of interest was separating the analysts from the investment-banking operations. ... SEC spokesman John Nester said the agency believes there are other restrictions in place, such as keeping bankers physically separate and prohibiting bankers from influencing analyst coverage decisions. In a letter requesting the change, the SEC and the banks had stated 'it is appropriate to eliminate' certain provisions because the conduct is now covered by new rules and regulations. Securities firms covered by the settlement, including Goldman Sachs Group Inc., Morgan Stanley and the Merrill Lynch unit of Bank of America Corp., declined to comment. ... The SEC is at the heart of the battle because of its mistakes during the crisis. ... Also yesterday, the head of enforcement at the Financial Industry Regulatory Authority, Wall Street's self-regulatory boy, resigned. Like the SEC, Finra has been criticized for failing to detect abuses that led to the crisis and didn't uncover the Ponzi scheme run by Bernard Madoff. ... The settlement allows the firms and the SEC to seek a judge's approval to change the agreement under certain circumstances. ... In a letter to the judge, Lewis J. Liman, a lawyer representing the securities firms, said the Chinese wall is no longer needed because of securities regulations enforced by Finra. The securities firms and SEC 'believe that these rules adequately address the concern intended to be addressed' in the original settlement, Mr. Liman wrote", my emphasis, Susanne Craig & Kara Scannell at the WSJ, 18 March 2010, link:
Did the SEC join the 12 firms, or did it take orders? Investment-banking and retail brokerage should be severed. The settlement did not do that, so had no effect in my opinion. Enforced by Finra? Hahahahaha would the Mogambo Guru say. Physically separate? Did Nester ever hear of a telephone? Or the internet? You who take the SEC's case against Vampire Squid seriously, please read this.