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OT SEC investigated.......at last!

http://www.thesanitycheck.com/BobsSanityCheckBlog/tabid/56/EntryID/495/Default.aspx


SEC To Be Investigated By GAO
Location: Blogs Bob O'Brien's Sanity Check Blog
Posted by: bobo 10/26/2006 5:48 AM
Well, for those who felt that the SEC would continually get away with murder, operating like a fiefdom above accountability to anyone, free to ignore the basics of due process, the rule of law, responsible regulation, etc....News Flash!

The SEC is going to be subjected to the scrutiny of the GAO.

This just in from Bloomberg.

The Mack investigation is the catalyst - Senator Grassley's lack of satisfaction by the SEC's responses, and the growing sense that the SEC has become a captive regulator, co-opted by wealthy and powerful special interests on Wall Street (many of whom routinely violate the rules and break the law, as evidenced by the wrist slap fines the SEC tosses around whenever years of larceny are discovered at the largest players there), and completely uninterested in quaint notions like investor protection or anything in the public interest.

Readers of my blog can attest first-hand to the seeming complete disregard for investor protection that the SEC has demonstrated in naked short selling abuse. The prevailing attitude of the Commission was best summed up by Commissioner Annette Nazareth's high-handed and dismissive statement when confronted by the news that many Reg SHO stocks had suffered massive bear raids, resulting in 50% or greater declines since going on the list and Reg SHO's implementation a few months prior. Her sentiment was that those complaining were just disgruntled bad sports, pissy their stocks had gone down - essentially, degenerate gamblers annoyed over their bad bets.

That said it all for me. Told me everything I needed to know.

The SEC is broken, and needs to be dismantled. It fails in its essential purpose - to protect investors from the predation of Wall Street, and keep that body's larceny in check. If anything, the Commission is now a silent partner in the worst abuses against investors, and actively aids and abets the most blatant and brazen acts of crookedness - occasionally attempting a pretense of effectiveness by levying a fine akin to demanding the industry's spare change.

We have long been calling for a special prosecutor. Perhaps this is the first step in that badly needed direction. The laundry list of egregious offenses is long, and rather obvious. It shouldn't be too hard for the GAO to read the plain language of the 1934 Securities Exchange Act and contrast it against the behavior of the SEC, and the absurd rules it has promulgated.

It is impossible to explain Grandfathering as anything but a hall pass for the worst violators of delivery rules - there is no investor protection in that, unless one defines "investor" as "Wall Street stock manipulator" and "protection" as "safeguarding illegally generated profit at shareholder expense." It is impossible to interpret Section 17A's mandate for the prompt clearance and delivery of shares in the manner that the Commission has, unless one is deliberately trying to ignore the delivery part of the requirement, and pave the way for the industry to institutionalize fraud. It is impossible to frame the options market maker exemption as consistent with investor protection, unless one is trying to claim that derivatives speculators are the investors the 1934 Act was intended to protect, and stock investors are their intended prey, to be abused in whatever manner is required for the options market to have the most lucrative trade. It is impossible to hear the SEC's now well-established lie about how "Reg SHO is working" and be even passingly familiar with the actual numbers of FTDs via the FOIA data, without comprehending that our securities regulator is lying, regularly, to the public, in order to cover its ass, and to protect Wall Street's lucrative business of defrauding the American public - taking money, and failing to deliver the goods.

I could go on and on. The Aguirre matter merely highlights an out-of-control agency doing the bidding of those it was established to police. The SEC was set up after the Pecora hearings gave the country a thorough understanding of how the most venerated names on Wall Street had behaved worse than the most base criminals of the day. It came into being after the 1934 Act was passed, which strove to stop the worst of the larceny that characterized the markets, and the behavior of the brokers, banks and stock pools (hedge funds) that dominated the business. That the SEC has promulgated rules that ignore, or worse yet, are in conflict with that Act, typifies the problem. In a nutshell, the SEC behaves like Wall Street's propaganda arm combined with its own private security force, where fanciful ideas like self-regulation and honor systems are formalized with a straight-faced gullibility by our regulators.

How did allowing an industry that had been shown to be a snake-pit of crookery to operate on the honor system become the prevailing wisdom? How did abdicating outside policing of the most important elements of the market protect investors? How did steadily eroding the basic safeguards of the 1934 Act benefit anyone but Wall Street? How does protecting the rich and powerful, at the direct expense of the investing public, fulfill the SEC's mandate?

I could devote books to this. But it wouldn't matter. What does matter is that finally it appears that the SEC is going to have to answer for its behavior, and is going to have its actions investigated by an outside entity. We can only hope that won't result in another cover-up.








Cheers!!!