As the financial-self regulator Finra tries to expand its regulatory empire, the Securities & Exchange Commission last week slapped Finra with a settlement for its role in doctoring documents and violating securities laws. Watchdog bites watchdog.
Current SEC chairman Mary Shapiro was the chief executive of Finra in 2008 when the violatioin allegedly occurred. The 2008 incident was the third time, which included its predecessor the National Association of Securities Dealers (NASD), where the regulator provided altered or misleading documents to the SEC, who Finra is supposed to answer to.
The Keystone Kops nature of financial regulation continues. The SEC has allegedly mishandled roughly 19 referrals it received from Finra of suspicious trading activities of SAC Capital Advisors LP, one of the country’s largest unregulated hedge funds run by billionaire Steve Cohen.
The dysfunctional nature of securities oversight came into Technicolor last week when U.S. District Judge Jed Rakoff questioned the $285 million settlement Citigroup made with the SEC over fraud charges for its failed mortgage bond deal. Rakoff was questioning why Citigroup was being let off the hook so lightly, when Goldman Sachs paid a $535 million fine for a similar exploding mortgage bond deal known as Abacus in 2007. Rakoff has been a frequent critic of Wall Street violations, perhaps best known for questioning the purchase of Merrill Lynch by Bank of America for a similar $33 million, a slap on the wrist in 2009 when Merrill Lynch executives helped themselves to $3.6 billion in bonuses after $27 billion in losses–all backed by the taxpayer. In 2010, Rakoff approved a $150 million settlement, calling it “half-baked justice at best.”
Even after all of these bailouts, the cozy relationships between Wall Street and their regulators endure, and no one goes to jail. As the usual case, the companies avoid going to trial by neither admitting nor denying any wrongdoing. Your eyes will open up even more inThe Pirates of Manhattan II: Highway to Serfdom. www.thepiratesofmanhattan.com
