Showing posts with label SEC. Show all posts
Showing posts with label SEC. Show all posts

Thursday, September 14, 2017

The SEC, ICOs and roaches

In a statement straight out of the Ministry of Public Enlightenment, a member of the U.S. Securities and Exchange Commission's (SEC) division of enforcement "compared those seeking to leverage the blockchain use case improperly to cockroaches."

To be specific, SEC Enforcement Division co-director Steven Peikin said "roaches kind of crawl out of the woodwork and try to scam money off of investors."

Of course, he should know.

According to the Anne Frank Guide, this type of language was a key feature of nazi propaganda: "Jews are described everywhere as a threat to Germany and the German way of life that had to be dealt with quickly and harshly. They were even compared to rats and cockroaches."

The issue is this: it is impossible for Mr. Peikin to know which ICOs are scams unless he can look into the hearts of ICO issuers to determine their true motivation. He knows this. We know this. He must, then, actually be referring to all ICOs. This is the same type of  discriminatory attitude used to categorize all Black men as "thugs."

This is also a prejudicial statement from a person in a position to not only influence, but to actually carry out enforcement actions against ICO issuers. My hope is that legal counsel for those so accused would point to this single statement as justification for dismissing, or at least questioning, any charges brought by the SEC.

One wonders why the SEC did not use the same language to describe the traders at Goldman Sachs, fined more that $5 Billion in connection with its sale of residential mortgage backed securities, or Wells Fargo when they set up a special sales office to steer risky subprime loans to residents in Prince George's County, Baltimore city and other predominantly black communities, or Standard and Poor's when issuing fraudulent credit ratings on residential mortgage-backed securities and collateralized debt obligations. (Talk about insects....)

We know why Mr. Peikin and the SEC Enforcement Division made no such statements. After all, employees at these large financial institutions are friends, fellow church and synagogue members, colleagues and, most importantly, potential employers.

This is exactly why ICOs are so necessary and why they are popular. 

Friday, August 11, 2017

SEC takes jab at startups while leaving the big banks alone

The Securities and Exchange Commission’s concern about “initial coin offerings” is understandable. There are significant problems in the ICO marketplace, but new markets always have issues. Unfortunately, the SEC’s recent restrictions defining the tokens sold through such offerings as “securities” completely miss the point and once again will constrain the ability of startups to raise much-needed capital without having to go to a bank or venture capitalist first.


Monday, June 9, 2014

Monday, November 26, 2012

Exit, Stage Left

Gary Brouse, ICCR and Mary Schapiro, SEC.
SEC Open Meeting, 2011.  Photo by William Michael Cunningham.
We note, with more than a little regret, Mary Schapiro's exit from the Securities and Exchange Commission. How her departure will impact the Dodd/Frank Section 342 initiative and Crowdfunding is unclear.

She was in a tough and thankless job. In her favor, she did save the Agency. The question is, save it for what? Will it take the more aggressive stance required to repair the financial system? It seemed to be moving in that direction.

My concerns with the Agency are well known, but Ms. Schapiro was cordial and professional every time I met her.

I thank her for her service and wish her well.

Wednesday, September 12, 2012

Crowdfunding webinar - 9/13/12

This webinar will provide a social investing summary of the law, along with a summary of how investors and businesses can use the law to enter the Crowdfunding market. We will also review current developments.
All paying attendees will get a copy of my book: The JOBS Act: Crowdfunding for Small Businesses and Startups [Paperback - Published 9/26/12] 
The law targets emerging growth companies and defines them as an issuer with “total annual gross revenues of less than $1,000,000,000 (one billion dollars)..during its most recently completed fiscal
For potential investors, providing a platform for the sale of emerging company securities does not require registration as a Broker/Dealer, given certain exemption qualifications. To become a funding platform, vendors must fulfill 12 requirements. Equity issuers are subject to certain restrictions/limits.  There are four trading restrictions and three exemptions. Issuers (Emerging Growth Companies) are liable for any untrue statements of material facts.

In addition, the SEC must make a special effort to reach out to women, veteran and minority firms.

To register, go to:

Wednesday, August 29, 2012

SEC Open Meeting 8/29 on the JOBS Act

The above is from the SEC's meeting on Rule 506 of Regulation D. This is an important provision that will allow small firms to raise up to $50 million under the JOBS Act. The result of the meeting is that a draft rule will be posted to the SEC website concerning the mechanics of this provision later today. 

Tuesday, August 7, 2012

JOBS Act Hearing and Meeting

Schapiro and Issa at JOBS Act hearing
Mary Schapiro, Chair, SEC and Darryl Issa (R-CA)
Chairman, Committee on Oversight
and Government Reform,
at JOBS Act Hearing, June 26, 2012.
Photo by William Michael Cunningham
As C-SPAN noted, "The JOBS Act (Jumpstart Our Business Startups Act), designed to help small companies raise investment capital, was signed into law by President Obama on April 5, 2012. 

On June 26th, the TARP Subcommittee of  the House Oversight held a hearing on the Security and Exchange Commission's (SEC) efforts to implement the Act. The SEC had 270 days from the signing of the Act to set forth rules. Rep. Patrick McHenry (R-NC) chaired the hearing. The JOBS Act relaxes some of the regulations put in place by the Sarbanes-Oxley Act and establishes the creation of Internet funding portals to facilitate 'crowd funding,' the collective pooling of money to support business projects. Critics worry that the JOBS Act's relaxed regulations will encourage fraud." 

We attended the hearing and found that the SEC will be late in responding to the deadlines established by the law. No mention was made of the recent $2 billion dollar loss at JP Morgan or the LIBOR scandal. Given this, concerns about fraud were misplaced. 

This continues a pattern. On August 1, industry representatives FINRA and SIFMA met with the Treasury and the SEC to discuss the Act. No public advocates were present at the meeting, which focused on protecting the financial services industry from competition, not protecting consumers.

Tuesday, May 15, 2012

SEC v Citi - First response to new briefs

Selected highlights from the Appeals Court Brief filed yesterday by the SEC:

"As one example, the same district judge who rejected the consent judgment here approved a consent judgment in which Worldcom agreed to injunctive relief—and later, a $750 million penalty, one of the largest ever obtained by the Commission—without admitting or denying the fraud allegations in the complaint."

Irrelevant, since they refer to a different time and industry. More importantly, a $750 million dollar fine in 2002 translates into a $962 million dollar fine in 2012. Or a $285 million dollar fine is only $223 million in 2002 dollars.

The SEC notes that "BP resolved charges that it violated the Clean Air Act in connection with the Texas City refinery explosion, which killed 15 people and injured 170, by entering into a consent judgment that ordered it to undertake an array of remedial measures and pay one of the largest civil penalties ever assessed for Clean Air Act violations at an individual facility."

The disaster occurred on  March 23, 2005. Had any Court fully considered the public interest, as the lower Court is attempting to do here, it is likely that BP would not have had the Deepwater Horizon oil spill, "the largest accidental marine oil spill in the history of the petroleum industry."

The SEC's brief also notes that "The district court asked rhetorically how it can “ever be reasonable to impose substantial relief on the basis of mere allegations,” but I suggest the district court was really asking how can it “ever be reasonable to impose substantial relief on the basis of mere allegations,” after a major global financial market crisis caused by recidivist financial institutions using the US dollar's status as global reserve currency to sell fraudulent financial instruments around the world.

The district court did give proper deference to the Commission’s assessments, given the Commission's recent history of not protecting the public interest, given the recidivism noted. The central issue is this: is the SEC “a government actor committed to the protection of the public interest?” The SEC's financial crisis performance suggests the agency has been captured by the industry it regulates. While "the decision to investigate, to prosecute, and to settle is solely an executive function" a district court can examine the investigative, prosecutorial and settlement performance of an agency to determine the competence of an agency in protecting the public interest.

The SEC's brief notes that "The reason is that many, and perhaps most, defendants will not admit to factual allegations because they are concerned about, among other things, the collateral estoppel effect of admissions on parallel private actions." That the SEC is concerned with this at all is evidence that they have been captured by the industry.

The SEC's brief notes that "Without the ability to compromise, the Commission would face a difficult dilemma." The lower Court rejection does not prohibit the SEC from compromising. It hopes to prohibit them from making compromises that are contrary to the public interest.

The SEC notes that "the Commission obtained the injunctive relief it sought in the complaint and monetary relief totaling $285 million, which is more than 80% of what it could have reasonably expected to obtain if it prevailed at trial." I estimate reasonable relief would be in the $3 billion dollar range.

Thursday, January 26, 2012

"Friend of the Court" brief in SEC vs. Citigroup (2nd Cir Ct of Ap)

William Michael Cunningham submitted a "Friend of the Court" brief in a case currently pending before the United States Court of Appeals for the Second Circuit.

The case concerns the rejection, by a Federal Judge, of a settlement agreed to by the United States Securities & Exchange Commission (SEC) and Citigroup Global Markets Inc. (Citigroup), the latter accused of securities fraud.

As a friend to the Court, Mr. Cunningham seeks to provide an independent, objective and unbiased view in support of broad public interests. His education and experience have uniquely positioned him to provide objective, independent research and opinions concerning the issues central to the case.

The "Friend of the Court" brief concludes by noting that markets have become less stable. Faulty regulatory practices and collusion (too big to fail, etc.) have moved regulators and the direction of supporting suppliers to the financial service marketplace. A decision by the (Appeals) Court in favor of the SEC and Citigroup will further weaken this support, to the detriment of market institutions and the public. My economic models show the global economy remains at risk.

Wednesday, January 4, 2012

Pamela Gibbs Selected as SEC OMWI Director

"The Securities and Exchange Commission..announced that Pamela A. Gibbs has been named as the inaugural Director of the Office of Minority and Women Inclusion, which oversees diversity in the agency's employment, management, and business activities.

Ms. Gibbs comes to the SEC from the Commodity Futures Trading Commission, where she has served since October 2009 as the Director of its Office of Diversity and Inclusion. In that role, Ms. Gibbs was the principal advisor to the CFTC Chairman on equal employment and diversity matters, and oversaw outreach and recruitment of minority and women's groups. She also worked with the agency's Office of General Counsel and Office of Human Resources to ensure fairness and consistency in the agency's personnel policies and practices.

Prior to the CFTC, Ms. Gibbs.. started in 1991 as a trial attorney in the Civil Rights Division (of the Department of Labor). She later was Acting Deputy Director for Program Operation in the Office of Federal Contract Compliance Programs, and was Director of the Equal Employment Opportunity Unit in the Employment Standards Administration from April 2006 to October 2009."

The CFTC has one of the weakest Offices of Diversity and Inclusion in the Federal Government and is not included under OMWI. It should also be noted that the Department of Labor dropped the ball on many significant discrimination cases over the years. Finally, it is well and widely known that EEOC has been ineffective since the days of Clarence Thomas.

All in all, a choice that bears watching.

Monday, November 2, 2009

Major SEC shareholder resolution policy change

According to the Responsible Investor and SEC websites, in a major policy reversal, "the Securities and Exchange Commission (SEC) (will) allow shareholder resolutions (concerning) companies’ environmental and social risks.. Similar resolutions had previously been blocked under policies dating back to the Bush administration. The move was unveiled in new guidance by the SEC’s Division of Corporation Finance under new director Meredith Cross. As a result, companies will no longer be able to automatically exclude resolutions seeking information on the risks of environmental, human rights and other social issues." Shareholder resolutions are now sure to include executive compensation, community development, diversity, gender, SRI, ESG and CSR issues.


Friday, September 11, 2009

Hearing on Oversight of the SEC’s Failure to Identify the Bernard L. Madoff Ponzi Scheme and How to Improve SEC Performance(Jui Kai Li)

On Sept 10th, the US Senate Committee on Banking, Housing, and Urban Affairs held a hearing on Oversight of the SEC’s Failure to Identify the Bernard L. Madoff Ponzi Scheme and How to Improve SEC Performance.

Testifying were H. David Kotz, Esq. - Inspector General SEC, Harry Markopolos- Chartered Financial Analyst and Certified Fraud Examiner, Robert Khuzami, Esq - Division of Enforcement SEC, John Walsh, Esq - Office of Compliance Inspections and Examinations SEC

The testimony is summarized below and copies of the written statements are available at;

Madoff's alleged Ponzi scheme is the biggest fraud held by a person in the US history. By definition, a Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. Although investors may be able to feel something wrong with the unlikely consistent returns Madoff provided, without an independent agency to stop the problematic trading activities, investors could only continue to suffer from Madoff’s tricks.

Poor oversight of the government will cause high corporate governance risk. In this case, the failure of SEC’s early detection of Madoff’s fraud caused investors’ countless losses and victims. See the victim list below(sources: WSJ):

Results of the IG Report
SEC’s Failure
“Our report concluded that notwithstanding these six complaints and two articles, the SEC never conducted a competent and thorough examination or investigation of Madoff for operating a Ponzi scheme and that, had such a proper examination or investigation been conducted, the SEC would have been able to uncover the fraud” said Mr. Kotz.

Not Conflict of Interest Found
“We did not, however, find evidence that any SEC personnel who worked on an SEC examination or investigation of Madoff or his firms had any financial or other inappropriate connection with Madoff or the Madoff family that influenced the conduct of the examination or investigatory work. We also did not find that former SEC Assistant Director Eric Swanson’s romantic relationship with Bernard Madoff’s niece, Shana Madoff, influenced the conduct of the SEC examinations of Madoff and his firm. We further did not find that senior officials at the SEC directly attempted to influence examinations or investigations of Madoff or the Madoff firm, nor was there evidence any senior SEC official interfered with the staff’s ability to perform its work” said Mr. Kotz.

Mr.Kotz recommended that "so that appropriate action ... is taken, on an employee-by-employee basis, to ensure that future examinations and investigations are conducted in a more appropriate manner and the failures aren't repeated."

Why no one found it?
If there is truly no conflict of interest in the SEC’s investigation, the only reason why the SEC failed to uncover the fraud earlier is its inefficiency and incompetence in the agency. The lack of communication among SEC offices cleared the way for Madoff to continue his scheme for nearly two decades. "The entire SEC should be held accountable for what happened," Mr. Kotz said. Mr. Markopolos testified that the agency's staff "was not capable of finding ice cream in a Dairy Queen."

According to the transcript, Madoff dismissed an SEC investigation as a "fishing expedition" and highlighted how investigators develop cozy relationships with firms they are supposed to regulate.

"The guys ... ask a zillion different questions and we look at them sometimes and we laugh, and we say are you guys writing a book?" Madoff said. "These guys, they work for five years at the commission then they become a compliance manager at a hedge fund now."

Changes needed to be made
However, no SEC employees have been fired specifically in relation to the bungled investigations of Madoff, though the heads of the agency's enforcement division and inspections office, which conducted the probes, have left the SEC in recent months.
Mr. Khuzami, who joined the agency in March, said he has started the most extensive restructuring of his division in at least 30 years."We will thoroughly examine all of the conduct and take appropriate action," SEC spokesman John Nester said in a statement after the hearing. "The pace of reform is rapid but (the SEC) needs to keep that pace going." said Mr. Markopolos.

Thursday, August 27, 2009

SEC issues investor warning

According to the Chicago Sun Times, "Exchange-traded funds that leverage their holdings could lead to outsized losses, the Securities and Exchange Commission said. It said brokers and financial advisers should warn people away from them unless they plan to hold them for just a day. The problem with leveraged ETFs comes down to the magic and mystery of compounded returns. If you leave your money in a leveraged ETF over time, your return can differ drastically from the fund's stated goal, especially in volatile markets. "

Friday, July 10, 2009

Hearing on the Administration’s Proposal to Regulate the Over-the-Counter Derivatives Market (William Cunningham, Jui-Kai Li, Hsiu-Jui Chang)

At 10:00 a.m. on Friday, July 10, 2009, in 1100 Longworth House Office Building, the Full Committee of the House Agriculture Committee and the House Financial Services Committee conducted a hearing titled "A Review of the Administration’s Proposal to Regulate the Over-the-Counter Derivatives Market." Timothy F. Geithner, Secretary, U.S. Department of the Treasury, was the only witness.

The hearing began with a consideration of the risk to taxpayers from the over the counter derivatives market. According to Wikipedia,

"Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. The OTC derivative market is the largest market for derivatives, and is largely unregulated with respect to disclosure of information between the parties, since the OTC market is made up of banks and other highly sophisticated parties, such as hedge funds. According to the Bank for International Settlements, the total outstanding notional amount is $684 trillion (as of June 2008)."

Upon opening of the hearing, the Chair of the Ag Committee stated that: "Government should not be the one to judge risk." Among other topics, members of the Committee and the Secretary discussed the fact that new regulation is being driven by the a recognition that the OTC market provides a broader set of investment options, but capital requirements and other protections need to be strengthened to better reflect the true riskiness of these options. The Secretary reiterated that this was the purpose of the proposal.

The need for international cooperation among regulators was discussed at several points. A recurring worry was regulatory arbitrage. Influencing this concern was the ability of new technologies, like the Internet, to act as a powerful disintermediation engine, thereby making it easier for OTC derivative market customers to move trading activity to the exchange that is the least regulated.

Another topic of discussion concerned standardized versus customized OTC derivative products or contracts. Note that the Financial Reform Plan released by the Obama Administration calls for the use of more "plain-vanilla" derivatives.

One Committee member suggest banning Credit Default Swaps (CDS) outright, but the Secretary rejected this suggestion, calling instead for higher CDS capital requirements.

The Obama Administration Stimulus Plan was discussed, with one Committee member saying that recent increases in the unemployment rate showed the Plan to be a failure. The Secretary countered by saying that decreases in unemployment lag increases in economic growth at this point in a recovery.

Several Committee members discussed the need for a central OTC derivatives clearinghouse. One member suggested the creation of an electronic clearinghouse. The Secretary suggested that this would increase transparency and make price discovery more efficient. The Secretary also noted that this increased transparency will require closer cooperation and coordination by the SEC and the CFTC, but no decision appears to have been made yet about merging the two regulatory bodies.

The only fireworks came when one committee members asked the Secretary to guarantee that today's derivative buyer will not be tomorrow's bailout recipient. The Secretary declined to offer any such assurance.

Thursday, October 9, 2008

SEC Disclosure Initiatives (E.M. Chang)

Modernizing the Securities and Exchange Commission’s Disclosure System

Yesterday, the SEC hosted a roundtable meeting to discuss the 21st Century Disclosure Initiative. The Initiative seeks to examine the basic purposes of disclosure, from the perspectives of investors and markets. The SEC hopes to create a comprehensive plan for overhauling the current disclosure system, EDGAR.

In the first panel, panelists talked about the kinds of information and data format that the market and investors really need, given this dynamic market environment. Most panelists argued that investors need summarized information rather than whole financial statements.

A summary of panelist comments would be:

"Most individual investors access company information using third party services, like Yahoo Finance, Bloomberg, etc… The issue is that people don’t really have time and ability to figure out where is the number they want by looking at the hundreds pages financial statements in the EDGAR system. However, XBRL technology might help improve the usefulness of the new disclosure system by providing a more efficient information distribution. However, one member pointed out that the nature the information is much more important than the way we distribute it. We still lack much important information under the current filling system, like the off-balance sheet transactions, unregulated financial products, especially the credit default swap transactions. We still need to force the companies to disclose this material information to help investor to understand the risk they are facing and further to make their investing decisions."

In addition, some members suggested that the SEC should consult with an top level information provider, like Bloomberg or Morningstar, to figure out what kind of information format and summary most investors need, how to present the data, how to create useful graphs and summary tables.

One panel member stated that: “the information in the EDGAR system is a national treasure, but we need to present it in a more attractive way to our audience, or we might not have people to appreciate it and take a look at the treasures."

In the second panel, panelists provide suggestions for a future disclosure system. The goal of the system is to reduce filing cost and to provide more timely information to investors.

One panelist stated that the goal of the new system is “not to find a way to make the candle burn longer but to create a light bulb to replace the candle.” “The SEC should control the technology to do the job, instead letting the technology bind them.”

There are several challenges to developing this system. Some outlined were:

How to make sure all material information is disclosed in this system?
How to transfer some important footnote information or qualitative information into this new system?
How to disclose the information about unregulated products, like credit default swap?
How to broaden the scope of the information without increasing the burden for companies?

These issues were raised during the panel as was the need for further discussion to find solutions.

We see that the nature of the information is still the most important issue in this new disclosure system.

One member argued that “we want a real time disclosure system, but that is a little bit unrealistic.”

“We still need periodic report filing system to force companies to disclosure their information to increase transparency. But the goal is to force these companies to think about where they are and where they should go in the future,” said by one member in this panel.

In sum, we need to find a way to make the new disclosure system more useful to both institutional investors as well as individual investors. As one panelist noted: “We should not only make it work for the Wall Street, but also make it work for the Main Street.”

The 21st Century Disclosure Initiative seeks not only to creating a more sophisticated system for investors, but also to prevent future financial market turmoil.

As SEC Chairman Christopher Cox mentioned in his opening remarks: “The investors have a right to know the truth — and the risks — about the securities that trade in our public markets.”

Communicating these truths to investors and forcing companies to disclose these truths via this new system will be the main consideration for this new disclosure initiative.

E.M. Chang
MA, Economics (2009)
George Washington University

Wednesday, September 3, 2008

SEC Charges Two Wall Street Brokers in $1 Billion Subprime-Related Auction Rate Securities Fraud

According to the SEC:

"Washington, D.C., Sept. 3, 2008 — The Securities and Exchange Commission today charged two Wall Street brokers with defrauding their customers when making more than $1 billion in unauthorized purchases of subprime-related auction rate securities. The SEC's Division of Enforcement in 2007 formed a subprime working group, which is aggressively investigating possible fraud, market manipulation, and breaches of fiduciary duty that may have contributed to the recent turmoil in the credit markets.

The SEC's complaint, filed in federal court in Manhattan, alleges that Tzolov and Butler, while employed at Credit Suisse Securities (USA) LLC in New York, deceived foreign corporate customers in short-term cash management accounts by sending or directing their sales assistants to send e-mail confirmations in which the terms 'St. Loan' or 'Education' were added to the names of non-student loan securities purchased for the customers. Tzolov and Butler also routinely deleted references to 'CDO' or 'Mortgage' from the names of the securities in these e-mails. As a result, the complaint alleges that customers were stuck holding more than $800 million in illiquid securities after auctions for auction rate securities began to fail in August 2007. Those holdings have since significantly declined in value."

Monday, July 14, 2008

Freddie and Fannie: What should be done now

Our recommendations for dealing with the housing GSEs are as follows:

1. Freddie Mac should be closed. Having a second housing GSE was supposed to provide competition and serve as a check on the first housing GSE, Fannie Mae. Clearly, this did not work. No need to continue, so:
2. Merge Freddie and Fannie. Instead of two failing agencies, we now have one. Allows for a concentration of focus, effort. Stabilize the resulting institution.
3. After one year, move Fannie back into HUD. Fannie Mae was separated from HUD in 1968. Time to reverse this. Moving Fannie into HUD extends the full faith and credit guarantee umbrella.

Time to revise the housing GSE experiment.

Monday, June 30, 2008

U.S. Senate confirms 3 new SEC commissioners

According to Reuters,

"WASHINGTON, June 27 (Reuters) - The U.S. Senate on Friday confirmed one Republican and two Democratic nominees to fill open commissioner seats at the Securities and Exchange Commission. Luis Aguilar, a law partner at McKenna Long & Aldridge, and Elisse Walter, a senior executive with the Financial Industry Regulatory Authority, were approved for the vacant Democratic seats on the commission.

Troy Paredes, a professor at Washington University School of Law, was approved for the open Republican spot."

We do not expect much, at this late date, from these new Commissioners. In the SEC's upcoming battle with Treasury and the Federal Reserve Board, having the SEC board at full strength (something the Fed is not) is a small advantage, but will probably be negated.

Under the "Blueprint for Regulatory Reform: A Report from the Treasury Department on Ways to Improve Oversight of the Financial Services Sector" plan announced on Saturday, March 29, 2008, the Securities Exchange Commission and the Commodity Futures Trading Commission would be consolidated. As one blogger put it, "This would be done on the time-honored government principle of when you don’t know what to do, reorganize. ..the plan would actually weaken the SEC and replace some of its functions with industry self-regulation.

Under the heading of locking-the-barn-door-after-the-horse-has-escaped, the plan would create a new Mortgage Origination Commission (MOC) which would, among other .. innovations, set 'minimum educational requirements' for mortgage lenders."

To quote those guys from the Guinness beer commercial "Brilliant!"

We agree with former SEC Commissioner Grundfest, who said that "Cox was right to let the Federal Reserve and Treasury take the lead (in the Bear Stearns bailout), because it would be unseemly for the regulator of financial markets to be involved in a deal where he could be perceived as playing favorites."

Cox is still, in our opinion, the best financial regulator appointed thus far by the Bush Administration.

But it may be too late. The Bank for International Settlements issued a statement this morning that:

"The global economy may be close to a 'tipping point' that could see it enter a slowdown so severe that it transforms the current period of rising inflation into a period of falling prices.

In its annual report, the central bank for central banks said the impact of rising food and energy prices on real disposable incomes, combined with the reduced ability of financial institutions to make loans and high household debt levels may lead to a slowdown in global growth that 'could prove to be much greater and longer-lasting than would be required to keep inflation under control.'"

Of course, we could get lucky...

Tuesday, April 29, 2008

SEC Adopts Regulations to Implement Sudan Accountability and Divestment Act of 2007

According to the SEC, "The Securities and Exchange Commission has adopted rules requiring a registered investment company (fund) to disclose when it divests, in accordance with the Sudan Accountability and Divestment Act of 2007, from securities of issuers that the fund determines conduct or have direct investments in certain business operations in Sudan. The Commission adopted the rules on April 24, 2008. The Sudan Accountability and Divestment Act required the SEC to prescribe regulations requiring this disclosure by April 29, 2008.

On Dec. 31, 2007, the President signed the Sudan Accountability and Divestment Act into law. Among other things, the Act provides that no person may bring any civil, criminal, or administrative action against any fund, or any employee, officer, director, or investment adviser of the fund, based solely upon the fund divesting from securities issued by persons that the fund determines, using credible information that is available to the public, conduct or have direct investments in certain business operations in Sudan. This limitation on actions does not apply unless the fund makes disclosures in accordance with regulations prescribed by the Commission.

The rules adopted by the Commission specify the SEC forms on which disclosure must be made and provide a transition period, ending May 14, 2008, for disclosure of divestments that occurred between Dec. 31, 2007, and April 30, 2008, the effective date of the rules.

The full text of the detailed release concerning these rules has been posted to the SEC Web site at"