Showing posts with label SIFMA. Show all posts
Showing posts with label SIFMA. Show all posts

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.

Thursday, May 24, 2012

SEC v Citigroup heats up...

This week, a number of organizations submitted "Friend of the Court" briefs in SEC v. Citigroup Global Markets. (United States Securities & Exchange Commission v. Citigroup Global Markets Inc. - UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT, docket number 11-5227-cv.)

The case is now in an Appeals Court after a lower Court Judge threw out a settlement reached between the SEC and Citi.

The National Association of Shareholder and Consumer Attorneys (NASCAT), the Securities Industry and Financial Markets Association (SIFMA), the Business Roundtable, Occupy Wall Street and the US Chamber of Commerce have all either filed or are seeking permission to file briefs in this case.

Of course, industry groups, like SIFMA, believe that, if the lower Court ruling is upheld, the wheels will come off the economy. It will be the official End of the World. (We note that one of the attorneys for SIFMA, Annette L. Nazareth of DAVIS POLK & WARDWELL LLP, spent a decade at the SEC, supposedly protecting the public. Now she serves those she formerly regulated.)

Below, we take a closer look at SIFMA's filing.

SIFMA claims that "The District Court’s Order, If Upheld, Would Have a Direct Harmful Impact on All Participants in the Securities Industry," that "the District Court’s Approach Would Dramatically Reduce the Number of Settled Actions, Particularly in Cases Involving Financial Institutions." This is an absurd claim. In an era of elevated fraud and the resulting increased damage to investors, with the SEC apparently captured by the industry it ostensibly regulates (as Ms Nazareth's choice of employer proves), it is entirely reasonable to reduce the number of settlements, if for no other reason than to send a signal to market participants that fraud levels must be reduced in order to protect the public.

It is also reasonable for a Judge to review and reject a proposed settlement on occasion. They can't all be good. Otherwise, as I said in my Friend of the Court brief, why have a lower Court review at all? SIFMA  assumes all settlements reached between a securities firm and the SEC are perfect, that the very act of reaching settlement implies the public interest is served. Human imperfections guarantee that this cannot be true.

SIFMA also claims that "Reducing the SEC’s Discretionary Ability to Enter into Consent Settlements with Financial Institutions Would Harm All Participants in the Securities Industry." The SEC is charged with protecting the public. To the extent that they uncover and prosecute fraud, the public is protected. If they do not, not only is the public NOT protected, but the industry itself is damaged. As people become more certain that large financial institutions cannot be trusted, they either keep their money under a mattress or they find other ways to transact business, to the long term detriment of the very industry SIFMA represents.

Another laughable claim made by SIFMA is that "The Current Approach to Settlement Benefits the Securities Industry, the SEC, and Investors." No mention is made of the recent $2 billion dollar, taxpayer subsidised loss at JP Morgan or the fraud allegations surrounding the recent Facebook IPO. And remember, investors lost $17 trillion at the height of the financial crisis. I don't know how anyone could make this claim with a straight face.

Finally, SIFMA claims that "The Current Approach to Settlement Leads to Substantial Penalties and Deters Future Violations." We don't know what they're smoking over there, but all we have to say is "Puff, Puff, Pass...."

As Edward Wyatt at the NY Times pointed out, "Nearly all of the biggest financial companies, Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America among them, have settled fraud cases by promising the S.E.C. that they would never again violate an antifraud law, only to do it again in another case a few years later." We, too, have been pointing this out since 1998.

I'll have more to say about SIFMA, the $500.00 we made addressing one of their committees, their efforts to, legal or not, "crush" all opposition to securities market regulation, and why they are, well, misguided, in a revised brief I will file with the Appeals Court...