Sunday, February 8, 2009

More Power Centers at the SEC: The Wolves Will Be Roaming

One of the charming facts of the Chrsitopher Cox incompetency years at the SEC was that he was real good and creating burauratic infrastructure which slowed down and eliminated a lot of harrassment of Wall Street by the SEC.

Now that the clueless Mary Schapiro is in charge, she is listening to her hungry staff for clues. She admits this in a recent speech:

In speaking to our enforcement staff, I’ve been told that these [Christopher Cox]special procedures have introduced significant delays into the process of bringing a corporate penalty case; discouraged staff from arguing for a penalty in a case that might deserve a penalty; and sometimes resulted in reductions in the size of penalties imposed.
Following the advice of her staff, she is ratchtiing up the power of her staff big time:

At a time when the S.E.C. needs to be deterring corporate wrongdoing, the penalty pilot sends the wrong message. The action I am taking to end the penalty pilot is designed to expedite the commission’s enforcement efforts to ensure that justice is swiftly served to those public companies who commit serious acts of securities fraud.

Another immediate change I am putting in place to bolster the S.E.C.’s enforcement program is to provide for more rapid approval of formal orders of investigation — the permission slips given out by the commission that allow S.E.C. staff to use the power of subpoenas to compel witness testimony and the production of documents. When I was a commissioner, formal orders were routinely reviewed and approved within a couple of days by written approval of the commission or by “duty officer” — a single commissioner acting promptly and on behalf of the entire commission.

Today, however, many formal orders of investigation are made subject to full review at a meeting of all five commissioners, necessitating that they be placed on the calendar sometimes weeks in advance. In investigations that require use of subpoena power, time is always of the essence, and every additional day of delay can be costly. To ensure that subpoena power is available to S.E.C. staff when needed, I’ve given direction for the agency to return to the prior policy of timely approval of formal orders by seriatim approval or where appropriate, by a single commissioner acting as duty officer.
Schapiro is creating the opportunity for individual enforcement agents to create their own feifdoms, for harrasment, shakedowns and who knows what kind of corrupton. SEC harrasment of corporate America is going to increase dramatically under Schapiro. Of course, this will do nothing to stop the real bad guys of Wall Street becasue they are way, way ahead of Schapiro and SEC enforcement agents. They always have been. No further proof of this fact is needed then the news that the former head of the New York branch of the SEC invested his mother's money with Bernie Madoff.

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