NO QUARTER FOR CORRUPTION (Focussing on The Fed./FRBS)

[bartermania]

The SEC Report Card Is In. It Ain't Pretty.

Location: BlogsDave Patch's Blog
Posted by: dpatch 1/27/2006 7:56 AM
How Committed is the SEC?


Upon reflection, if you were to take the past 6 years and rate the SEC the best you could give them would be an “F”. Not a C-, D, or even a D- they get the flat out F - FAIL. The “Investor Advocate” has been embroiled in one scandal after another whereby they were caught cheating investors to protect Wall Street’s elite and the best they have ever offered is that they have spent this time wisely “studying” the issues.


Studying? And you still chocked on the test?


When Eliot Spitzer grabbed the reins in 2000 and started attacking Wall Street research and the conflicts associated with that research the SEC addressed the Senate Hearings by admitting they were “studying the matter” but were not ready yet to move in. I guess we should be satisfied that Spitzer did move in, forced the hand of the SEC, and a $1.4 Billion settlement was achieved.


That $1.4 Billion settlement was not what investors lost due to the conflicts, that was in the hundreds of billions of dollars. By Spitzer stepping in when he did, he at least he stopped yet more hundreds of billions from being scoffed from the investing public while the SEC “monitored the situation”


Then in 2003 it was Massachusetts Secretary of State Bill Galvin that decided to take on Putnam and this late trading market timing issue. This story is even better for the SEC as the whistleblower actually went to the SEC first about this issue and they threw him out. The SEC later admitted in more Senate Hearings that they were once again “studying the issue” when Galvin responded.


As billions more in fines were been handed out, and continue to be doled out to this day, the investors saw nothing for their losses. Billions in fines representing hundreds of billions in investor losses only came about because somebody other than the SEC stepped in to take action.


And then there is illegal shorting. What has the SEC done, pretty much nothing?


Yea the SEC fined Rhino Advisors $1 Million in 2003 for illegally shorting Sedona Corporation but they failed to take enforcement against the Refco Brokers the Rhino Executives reportedly used to orchestrate the fraud or Refco Management for allowing it to happen. The SEC has been negotiating settlements for 3-years on those parties. Instead of enforcement, the SEC let Refco go public with a cloud of regulatory misconduct over their heads and watched that quickly implode. Thomas H. Lee Partners has reportedly suffered over $1.1 Billion in losses because the SEC failed to appropriately address the Refco matters.


The NASD has taken several steps to address naked shorting and with most, they leave many of the abusers on the table as the abusers fall outside the regulatory authority of the NASD. They do not fall outside the authority of the SEC however.


John Mangan settled with the NASD and in the settlement it was identified that his “partner” in Mangan and McColl was involved in the illegal trading. In fact, the illegal trading transpired at his “partners” firm HLM Securities. Unfortunately, Mangan was the only one registered with the NASD so the only one the NASD could act upon. Where is the SEC and enforcement against the “partner”? Lets just say that the partner is the son of an established Wall Street Executive and we haven't heard a peep out of the SEC.


The stock Mangan was caught illegally trading was Compudyne and the year 2001.


The NASD brought a similar enforcement action against another small player, Hedge Fund Manager Hilary Shane for her illegal trading in the 2001 Private Placement in Compudyne. But there is one player and firm that seems to be skating away from SEC enforcement, Friedman Billings, & Ramsey (FBR). Reports out of FBR are that negotiations are in play with the SEC over settlements with the firm and with former CEO Emanuel Friedman. Unfortunately this settlement has been under review for far longer than the allotted 2-minutes. Make the call, does the call on the field stand?


By virtue of all the activities to date, it would appear this Wall Street firm is being afforded a more generous opportunity from this committed Agency. The Shane complaint was settled in December 2004 and Mangan in December 2005. FBR posted a release on a possible outcome in settlement negotiations months ago. So where is it?


Likewise, when the NASD brought an enforcement action against Scott Ryan and his firm Ryan & Co. the settlement stated that Ryan was illegally shorting for 3 Hedge Funds. The NASD was limited in enforcement authority as the 3 hedge funds are not registered members with the NASD. Ryan got spanked but the funds that profited from the fraud have been left to play for another day. While the SEC sits on enforcement against the Hedge Funds, those funds are free to find another willing to commit the fraud and free to profit of the monies stolen from the investing public.


It all comes down to commitment and clearly the SEC has little of it. Is the problem at the rank and file level in failing to bring the proposed actions to the Commission or is it the Commission waffling on agreements based on the players involved? We will never know because the SEC operates under a cone of silence. Either way the system is broke. Transparency is what the Commission expects out of others; secrecy is what we get out of the Commission.


Investor protection has been discarded and Wall Street fraud has taken a front row seat. This Commission gets an F in performance and effort and it is clear that all the “studying” in the world cannot fix this mess we have before us.

--------------------------------------------------------------------------------
Comments (4) Add Comment
--------------------------------------------------------------------------------
Re: The SEC Report Card Is In. It Ain't Pretty. By mhelburn on 1/27/2006 9:04 AM
Mangan and McColl agreed Mangan would provide the funds necessary to purchase the shares, with the two sharing equally in any profits. After agreeing to purchase the shares, HLM then sold short 80,000 shares in Compudyne at Mangan's direction, planning to profit by covering its position with the less expensive PIPE shares, according to the NASD.

Mangan and McColl split the profits, and Mangan received approximately $87,000 through the deal, never seeking permission from FBR or disclosing his interest in the HLM deal, the NASD says.

Published December 21, 2005 by the Charlotte Business Journal

--------------------------------------------------------------------------------

Re: The SEC Report Card Is In. It Ain't Pretty. By rtway on 1/27/2006 9:50 AM
Call me a skeptic Dave. but I question the score card on Mr. Spitzer also. These fines that he has doled out cover the cost of the overhead to run his dept. but hardly enough to slow down the bad boys. I am ,IMO, wondering if these fines were not negotiated with the bad boys as to make everybody a winner. To the bad boys, this is the cost of doing business.I would rather the score card on all parties involved be gauged in jail time. And where is the IRS in all this. If a 40 hr. a week Joe six pack tries to fudge a $100 charity donation. the IRS will spend $50,000 to get Joe 6 pack tp cough up the $100 plus penalties and interest. We shoul erect another wall in Washigton called "THE WALL OF SHAME". It would have to be pretty big to accomadate all of our civil servants that have failed us.

--------------------------------------------------------------------------------

Re: The SEC Report Card Is In. It Ain't Pretty. By Patchie on 1/27/2006 10:23 AM
Don't disagree. One of the things to consider in the Spitzer issue is that he alone did not agree upon a settlement. The SEC stepped in once Spitzer outed them and thus became a distraction.

Remember, the SEC overturned the NASD's actions against Elgindy including disbarment and..it was the DOJ that prosecuted Elgindy. Based on what we see before us, if it were up to the SEC Elgindy would still be out on the street orchestrating his fraud.

--------------------------------------------------------------------------------

Re: The SEC Report Card Is In. It Ain't Pretty. By bobo on 1/27/2006 11:33 AM
You could do a similar scorecard on the SEC's performance with Reg 17A.

Prompt clearing? A.
Prompt Settlement? F
Transfer of Record Ownership: F

Oh, what grade would grandfathering hundreds of millions, if not billions, of acts of fraud against shareholders bring? And what weight would that grade carry? Another F?

What a joke.

link: http://www.thesanitycheck.com/Blogs/DavePatchsBlog/tabid/66/EntryID/46/Default.aspx