Happy 75th Birthday SEC

On June 6, 1934, FDR signed into law the Securities Exchange Act of 1934 which bright the Securities and Exchange Commission to Life. Roosevelt then appointed Joseph P. Kennedy to be its first head which caused some to think this was “setting a wolf to guard a flock of sheep.” (Incidentally, Georgetown hosts the poorly named Joseph P. and Rose F. Kennedy Institute of Ethics).
This hasn’t been a good year for the SEC. Regulators continue their war against efficient markets. Last year’s shorting ban in financial stocks was a bust (financials underperformed the broader market). The SEC completely missed the Madoff scandal after being told what was happening. The agency’s own inspector general said they bungled the Pequot Capital thing (“raised serious questions about the impartiality and fairness”).
It gets even worse. Check out this Dow wire story from earlier this week:

The internal watchdog at the Securities and Exchange Commission revealed Monday his office is investigating several employees, including one top SEC official, after receiving complaints alleging they improperly disclosed non-public information.
One pending investigation by SEC Inspector General H. David Kotz comes in response to an allegation that a top SEC official improperly disclosed non-public information to a large investment bank.
In another case, Kotz reported that his office is investigating two enforcement attorneys for possibly disclosing non-public information from an internal SEC database to a corrupt FBI agent and short seller who was later convicted of fraud, racketeering and conspiracy.
Then, in yet a third case, the inspector general said he’s looking into whether a former SEC attorney may have revealed confidential investigative information in a book he wrote. Kotz said the attorney may have provided the privileged information to a company where he worked as a lobbyist after leaving the SEC.
Separately, his office is also trying to determine if non-public information may have been disclosed to a national news outlet.
Kotz, who is leading the internal investigation into the agency’s failure to detect Bernard Madoff’s Ponzi scheme, disclosed some details about his pending investigations in his newly published semi-annual report to Congress on Monday.
In it, he said he has 19 pending investigations, one of which is tied to the Madoff failings.

Here’s to 75 more years!

Posted by on June 4th, 2009 at 11:50 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.