SEC Tried to Make Markets Fair. Here’s What Happened

Two decades ago, a system for sending U.S. corporate filings over the Internet was hailed as a victory for transparency. Today, the Securities and Exchange Commission’s Edgar website is engulfed by concern over opacity. Researchers checking whether documents are distributed to investors fairly by the SEC found evidence that some paying subscribers got the information first. The commission is reviewing how data is disseminated by the service, which was activated during the Clinton administration as a way to broaden access to potentially market-moving data, a spokesman said. This is what happens when a technology designed to solve problems in the 1990s becomes the focus of scrutiny so many years later, said Manoj Narang, the chief executive officer of proprietary trader Tradeworx Inc. Thanks to high-frequency trading, every detail of how data is broadcast to U.S. markets is being reviewed in probes by the New York attorney general, the FBI and the SEC itself. More on Bloomberg [...]

The S.E.C. and Political Spending

It’s almost Election Day. Shareholders: Do you know how the cash from companies you invest in is being spent to influence the outcomes? Unless you invest in companies that voluntarily disclose their political spending, the answer is no. Worse, the Securities and Exchange Commission — the presumed guardian of investors’ right to know how corporate executives spend shareholder money — will not lift a finger to help you find out. More in the New York Times [...]

Fast Traders Are Getting Data From SEC Seconds Early

WASHINGTON—Hedge funds and other rapid-fire investors can get access to market-moving documents ahead of other users of the Securities and Exchange Commission’s system for distributing company filings, giving them a potential edge on the rest of the market. Two separate groups of academic researchers have documented a lag time between the moment paying subscribers, including trading firms, newswires and others, receive the filings via a direct feed from an SEC contractor and when the documents are publicly available on the agency’s website. The studies found a wide variation in the lag time, from no delay to one lasting more than a minute—a considerable advantage for computer-driven traders. The ability to get the information before it is on the SEC site can give traders precious seconds to act on the news. More in the Wall Street Journal [...]

The Debate Over Wall St. Enforcement

How much enforcement is enough to adequately oversee Wall Street and the major banks? Make regulations too onerous, and firms won’t pursue potentially worthwhile investments for fear of huge legal bills if they are accused of violations. Too loose, and banks and brokers will run amok like schoolchildren when the teacher leaves the room, which is what happened in the years leading up to the financial crisis in 2008. The tension on regulation has been on display recently as the regulated are pushing back against the tough stance taken on corporate misconduct. Not surprisingly, the regulators have responded by threatening to crack down harder. Each side postures about the appropriate level of oversight, with no clear answer on whether we have too much or too little regulation. More in the New York Times [...]

Finra’s CARDS plan is likely to be a game changer

Released for public comment Sept. 30, CARDS Version 2.0 is an ambitious effort by the Financial Industry Regulatory Authority Inc. to develop mega-data on the brokerage industry and its millions of customer accounts for enforcement purposes. While the regulated don’t generally share the regulator’s enthusiasm for the Comprehensive Automated Risk Data System, it is likely to be implemented. When it is, CARDS promises to be a game changer in a number of ways, including some that may impact the fiduciary debate. More on Investment News [...]

Wall Street watchdog, US states mull new system to clean up brokers’ records

Wall Street’s industry-funded watchdog and U.S. state securities regulators are considering whether to develop a new type of regulatory process for brokers to follow for erasing complaints from their public records, an official said on Thursday. The Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) have been engaged in preliminary discussions about whether to revamp the process that most brokers use for requesting so-called “expungements,” said Linda Fienberg, who heads FINRA’s arbitration unit. More on Reuters [...]

When Banksters Buy Regulators and Prosecutors

Two of our nation’s top attorneys, Helen Chaitman and Lance Gotthoffer, just released Chapter 3 of their riveting and free book, JPMadoff – The Unholy Alliance Between America’s Biggest Bank and America’s Biggest Crook. All Americans concerned about financial fraud and the role of our regulators and politicians in sustaining financial fraud need to read this book at
The book, which incorporates exclusive interviews with Bernie Madoff, focuses on JP Morgan Chase ’s 20-year role in laundering money for Madoff. Money laundering, as everyone knows, is a big-time criminal offense. Yet no one at JP Morgan Chase (JPMC) who was involved, year after year, in taking in Madoff’s huge client deposits and watching him transfer them to a small number of special “clients” rather than invest them in the securities he claimed he was buying, bothered to pick up the phone and inform anyone in law enforcement. Indeed, according to the authors, the New York office of JPMC failed to report anything amiss even after its London office conveyed an explicit warning that Madoff was perpetrating a fraud. More on Forbes [...]

Head of municipal securities office at U.S. SEC to leave agency

The director of the office of municipal securities at the Securities and Exchange Commission, John Cross, will leave his post in November to return to the U.S. Treasury Office of Tax Policy, the agency said on Tuesday. Cross was named head of the newly formed office barely two years ago after becoming a leading figure in the $3.7 trillion municipal bond market through his role as associate tax legislative counsel in the Treasury’s tax policy arm. More on Reuters [...]

U.S. regulators adopt new risk rules for securitization

U.S. regulators on Tuesday issued a rule requiring banks that sell loans to investors to keep part of the risk on their own books, a measure aimed at preventing the sloppy loans that sparked the 2007-09 credit crisis. The rule was mandated by the 2010 Dodd-Frank Wall Street reform law. After years of debate over its parameters, the 553-page measure was adopted by three of the six agencies that need to sign off on it. More on Reuters [...]

Madoff Trustee, Investor Strike Settlement

A real-estate developer who invested with Bernard Madoff agreed to return $32.75 million in cash and surrender $29.35 million in claims against the convicted Ponzi-scheme operator’s investment firm under a new settlement. Irving Picard , the court-appointed official tracking down money for victims of the biggest Ponzi scheme ever, on Friday filed papers in bankruptcy court outlining a settlement with developer Edward Blumenfeld, his New York real-estate company and his family. More in the Wall Street Journal [...]