By Pam Martens: November 26, 2012
The SEC has announced the departure of its Chair, Mary Schapiro, on December 14. The laudatory statement from the SEC depicted her chairmanship as follows:
“During her tenure, Chairman Schapiro worked to bolster the SEC’s enforcement and examination programs, among others. As a result of a series of reforms, the agency is more adept at pursuing tips and complaints provided by outsiders, better able to identify wrongdoers through vastly upgraded market intelligence capabilities, and more strategic, innovative and risk-focused in the way it inspects financial firms.”
To close observers of the SEC, the above statement is pure fiction. On November 1, Davis Polk, the large corporate law firm, issued a report on the implementation of the Dodd-Frank financial reform legislation, which is under the auspices of the SEC. The report noted that “As of November 1, 2012, a total of 237 Dodd-Frank rulemaking requirement deadlines have passed. Of these 237 passed deadlines, 144 (61%) have been missed…”
This past weekend’s edition of the Wall Street Journal carried an article by Julie Steinberg, raising the specter that small investors are on their own when it comes to protecting their wealth against rogue broker-dealers ostensibly overseen by the SEC. Steinberg writes:
“Small investors have been shaken by a recent spate of brokerage mishaps, leaving some people worrying if their own assets are safe. Brokerage firm Rochdale Securities, which is based in Stamford, Conn., has been struggling to stay afloat after an errant trade in October depleted the firm’s capital, while this month, Hudson Valley Capital Management, a New York firm, was expelled from the securities industry after its chief executive allegedly used customer assets to cover up losses he sustained while day trading…Those two incidents followed other high-profile ones: MF Global Holdings…a brokerage that allegedly misappropriated $1.6 billion in customer funds as it tried to stay alive last year, and Peregrine Financial Group, an Iowa firm that declared bankruptcy after its founder admitted to a nearly 20-year fraud perpetrated against clients.”
Steinberg then lists a string of time-consuming research steps a small investor should take to ferret out a safe place to invest. I have a better idea: remake the SEC from Wall Street’s lap dog into a powerful regulator with teeth and criminal powers. No one on Wall Street genuinely fears an SEC imbued with only civil prosecution.
Serving as interim Chair of the SEC until President Obama makes a permanent appointment will be Elisse Walter, one of the Democrats currently serving as an SEC Commissioner.
We have observed and documented the performance of Mary Schapiro at the helm of the SEC over the past four years. A sampling of that coverage, linked below, shows the epitome of regulatory capture. President Obama needs to cast aside the typical demands of appeasing Wall Street, and put a forceful and courageous regulator in the Chairmanship role at the SEC.