Thursday, September 23, 2010

Right Conspiracy Theory, Wrong Conspiracy

So I was right that the timing of the SEC's announcement that it was investigating Goldman Sachs for fraud in April was too convenient. I said at the time that the case was politically motivated due to the impending financial regulation bill vote. And it seems I was right about the timing, but wrong as to the real reason. Reuters reported that an SEC inspector called the timing of the SEC's case against Goldman Sachs suspicious, suggesting that the SEC used it to divert attention from some bad PR. A report that sharply criticized its probe into accused Ponzi schemer Allen Stanford was about to be released, and the SEC seemingly hastened to get the Goldman Sachs news out. According to Reuters: "The SEC filed civil fraud charges against Goldman in mid-April, the same day it released a watchdog report accusing the agency of mishandling an investigation into Stanford's alleged $7 billion Ponzi scheme."
We all know that the SEC has been late to the market monitoring game, and that many innocent investors have suffered as a consequence. Maybe the agency really did not have the power to stop fraudulent behavior in the past. So when I read today that Chairman Mary Schapiro is taking a hard look at high frequency trading, algorithmic order execution and dark pools I have to wonder why we keep hearing that litany. And why nothing has yet been achieved.
From Bloomberg today: "Robert Khuzami, the U.S. Securities and Exchange Commission’s top enforcement official, said the agency is gearing up to use new powers from recent legislation to crack down on Wall Street after being faulted for not pursuing executives’ misconduct." Let me know how that works out for 'ya Bob?

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