Lexisnexis

LexisNexis Corporate & Securities Law Community 2011 Top 50 Blogs

Bon mots

"You can observe a lot just by watching." Yogi Berra

"We do not distain to borrow wit or wisdom from any man who is capable of lending us either." Henry Fielding, Tom Jones

"In our complex society the accountant's certificate and the lawyer's opinion can be instruments for inflicting pecuniary loss more potent than the chisel or the crowbar." United States v. Benjamin, 328 F.2d 854, 862 (2d Cir. 1964)

How The SEC Can Regain Enforcement Credibility And Promote The Public Interest In Honest Securities Markets

The SEC needs to abandon its current enforcement model that allows large firms that are serial violators of the securities laws to remain in business. The current model simply fines and penalizes large firms but allows them to continue in business. Those firms of course view such "enforcement" as merely a cost of doing business–an annoyance an perhaps an embarrassment. This should end. The SEC has long prided itself in protecting the integrity of the securities markets and public confidence in them. Its deeds should match its aspirations. We need the financial equivalent of three strikes and you're out.

Today brings news that the SEC has brought yet another enforcement action against Goldman Sachs.

Here is a brief and not comprehensive list of recent major enforcement actions against Goldman all of which were settled by the SEC.

January 25, 2000: $40 million penalty–IPO violations. Release 34-42636.

April 6, 2000: $5 million penalty–undisclosed bond markups. Release 34-42636.

April 28, 2003: $25 million penalty; $25 million disgorgement–fraudulent research. Lit Release 18113.

September 4, 2003: $5 million penalty–failure to have appropriate insider trading prevention procedures. Release 34-48436.

May 3, 2006: $1.5 million penalty–auction rate securities fraud. Release 34-53888.

Should the SEC prevail in its current action and prove its allegations in court I would ask the SEC chairman and four commissioners four questions.

*        Since history shows that fines have a limited deterrent effect isn't it time for the current enforcement model which permits serial violations by large firms to be abandoned?

*        If Goldman were a no-name firm with this history of violative conduct would you permit it to stay in business?

*        Should this firm be permitted by you to remain in business for one single day longer?

*        Do you suppose that putting a large serial violator of the securities laws out of business would have a significant deterrent effect that would be in the larger public interest?

The SEC should stop enabling serial securities law violators to continue to meddle with other people's money. Enough is enough.
Posted by