The following assessment is based on my own opinions about the SEC after an external examination. In my opinion, the SEC has been designed intentionally to operate with extreme inefficiency in order to protect the biggest criminals.
It is indeed a complex structure.
First, they fill many staff positions with inexperienced attorneys, many who lack have any real securities experience.
While some of their most experienced attorneys do have substantial experience in the securities industry, they tend not to be on the front lines where they can initiate investigations.
Second, SEC officials assign certain complex cases they do not want to be uncovered to inexperienced attorneys and investigators. The Madoff case was a prime example of this.
In addition, the enormous bureaucracy contributes to the inefficiency and ineffectiveness of the agency.
As a result of this tangled and inefficient structure, the SEC almost never uncovers large-scale fraud.
It only reacts when such cases have been uncovered by outside parties. Then, it goes after similar (but smaller) cases to make it look as if they are on their toes.
Other times, the SEC focuses on small players who either did not realize they were violating securities laws and/or did not affect many individuals, while leaving the big criminals unchecked – the floor traders, funds, etc. This is where the really big damage occurs.
So it seems as if the mentality at the SEC is similar to that on Wall Street – do whatever you want, but just don’t get caught because if you do we will investigate.
When a complaint is filed about a suspicious activity, SEC officials will not tell you what the status of the investigation is, or even if there is an investigation, leaving you to wait for months or even years, not knowing if they have looked into a case. They aren’t able to disclose this information by law. But how do we know that complaints have been investigated? Who would know if they sidelined the complaint?
What about when industry experts have presented suspicions of fraud? Should their submissions not be more thoroughly examined? After all, seasoned professionals are often able to detect various types of securities fraud even when they do not have sufficient evidence. It is not up to outsiders to prove fraud. They not have access to the data the SEC does. To expect them to prove fraud prior to a full SEC investigation is unreasonable.
When industry experts file a complaint, they need to be informed at some point the results to ensure that SEC investigators have looked into the matter properly. Otherwise they have NO ACCOUNTIBILITY.
An oversight committee should audit every complaint that comes in to ensure it has been considered.
While the SEC is not able to press criminal charges, the way it works is that they assist and advise the FBI or the Department of Justice to seek indictments when they feel it is necessary. Anyway you look at it, the SEC plays a major role in criminal charges involved with securities fraud.
Despite the many flaws of the SEC, I cannot say anything bad about any of the individuals with whom I have dealt, with one exception. In the past, I have discussed several cases of widespread fraud with one senior attorney, and his replies were basically “well that’s just the way it is.” This complacency made me sick.
I asked how he could have that attitude and maintain any level of pride in his job. I also asked how he could abandon his moral and ethical responsibilities to uphold the (intended) mission of the SEC.
The way I see it, if you take a position based upon the understanding that you are to uphold securities laws and do all in your power to protect investors, you should either press forward with this mission all the way through the bureaucracy so that the needed changes are made within the organization, or else resign.
I have had pleasant experiences with SEC attorneys and other staff. They are quite nice individuals. They are willing to listen and always ready to assist you in many ways. However, when it comes to preventing and even pursuing fraud, I cannot say that I have been pleased. Once again, my thoughts are that this is not necessarily due to the staff. I feel it is due to the manner by which the agency has been designed.
I would imagine the vast majority of SEC employees actually want to carry out the agency’s intended mission.
Unlike the very corrupt FDA, I believe SEC employees are largely honest.
Finally, I believe most of them actually think the agency is on top of things. And I feel that the younger employees really do believe they can make a difference; only because they have not been there long enough to see how things really work.
The older, more tenured employees seem to be less passionate about things, not because they don’t care. I’d say it’s due to their understanding of the limitations.
As a result, I would have to say the moral at the SEC is at an all-time low.
As mentioned, the SEC has been intentionally structured to operate inefficiently. It’s a problem at the top. And a problem that Washington is aware of.
The inefficiency and incompetence of the SEC is ultimately the fault of Washington.
You should not expect any significant changes under the leadership of Mary Shapiro. After all, she has spent much of her career in the regulatory side.
She’s been there. She knows how things are. The fact that she took the position of SEC chairman tells me she doesn’t mind remaining compliant with the “lay low” directives of Washington officials.
As useless as former SEC chairman Cox was, at least his incompetence was largely due to his lack of understanding how things really work at the SEC. Chairman Shapiro has no excuse not to shake things up.
Rather than insiders who have served in securities regulation for many years, the SEC needs fresh blood. Someone who is willing, ready and able to go in and completely overhaul the agency. And Washington must be ready to fund the SEC as needed. There is an entire list of things needed too lengthy to mention, but I think you get the point.
The problem is that the SEC chairman is a political appointment, so you will always have a politician running things, or else someone who is known by politicians. And all politicians serve the interests of industry lobbyists groups first.
That means you will never have an SEC chairman who is committed to protecting investors. They will ultimately remain as the ally of Wall Street.
More Articles on the SEC
0 Comments
