Weighing In: Don’t Believe the SEC’s Get Tough Policy

Don’t Believe the SEC’s Get Tough PolicyMary Jo White, the SEC Chair said she will push more violators to trial and reduce the number of cases that are settled with defendants neither admitting nor denying guilt. See SEC to seek admissions in some settlementsThis sounds good, like most sales pitches, but will it have any impact on an industry that is a powerful special interest group? We won’t know until we hear from politicians who receive millions of dollars of annual contributions to protect Wall Street interests.

No other industry can commit criminal acts and settle with the SEC without admitting guilt. The company pays a fine and the executives who made the decisions to defraud investors are free to develop their next financial scheme. These executives may even be rewarded for their fraudulent acts when they receive millions of dollars of bonuses and stock options.

I will believe the SEC is getting tough when I start seeing the executives who made these illegal decisions going to jail with sentences of ten or more years. This is the only deterrent that will cause Wall Street to clean up its act. That’s because Wall Street does not make these decisions, the executives of the companies that make up Wall Street make the decisions. And, they must be held accountable for decisions that defraud investors in a criminal court of law.

Not to be a pessimist, but we should not hold our collective breaths. This problem existed during two of the biggest stock market crashes in history (2000-2002, 2008). And, Wall Street executives made the decisions that created the speculative bubbles that produced the crashes. How many executives of major Wall Street firms went to jail for criminal acts that created trillions of dollars of losses for investors? You can’t count Bernie Madoff. He ran a boutique firm that did not have a big legal department that could tie up SEC attorneys for years.

Tell us what YOU think.

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