Better Markets Launches SEC Watch

Better Markets, the Washington, D.C. based public interest group, has launched a new webpage, SEC Watch, that will shine a spotlight on the Securities and Exchange Commission and its actions and activities.

“So many promises are made in Washington, D.C., only to be promptly broken.  Rarely is anyone held accountable.  ‘SEC Watch’ is designed to change that,” said Dennis Kelleher, president and CEO of Better Markets.

“The SEC is the primary agency charged with regulating and policing the U.S. capital markets.  It is also the front line agency that is supposed to protect Main Street from Wall Street, which is a high crime area.  The SEC is, therefore, vitally important to investors, taxpayers, the financial system, our economy and, indeed, all Americans,” said Mr. Kelleher.

“Unfortunately, the SEC failed miserably in the years before the financial crisis of 2008-2009, which will cost our country more than $12.8 trillion.  While doing better, it has regrettably too often failed since then as well.  For example, the SEC continues its de facto policy of not enforcing the law against the big, powerful and well-connected too-big-to-fail banks on Wall Street.  This has created a double standard where those on Main Street get the book thrown at them for the slightest offense, while the whales on Wall Street get away scot free for egregious illegal conduct.  This double standard not only incentivizes, but rewards and guarantees, more crime on Wall Street and more victims on Main Street,” Mr. Kelleher said.

“With new leadership being appointed at the SEC, there is an opportunity for the SEC to be restored to its historically consequential role as guardian of investors and markets without fear or favor,” Mr. Kelleher continued.  “For the sake of our country, the SEC needs to again become the premier agency focused on protecting Main Street, investors and markets, which will also benefit Wall Street, bankers and our economy.  We intend to use this webpage to watch the SEC closely and inform everyone whether they are living up to their mission or falling short.  Like Wall Street, the SEC also must be held accountable,” Kelleher concluded.

The Senate Banking Committee will hold a hearing tomorrow on President Obama’s nominee to head the SEC — Mary Jo White.

“There are many questions that Mary Jo White must be asked about her past statements about the financial crisis, about financial reform, and her activities as a defense lawyer representing Wall Street,” Kelleher said.

Kelleher said that White should be asked five key questions.

*How will you change SEC enforcement from its meaningless slap-on the-wrist puny cost-of-doing-business settlements that let Wall Street banks, executives and supervisors off the hook, to prosecutions, fines and penalties that are actually so meaningful that they will not only punish banks and bankers, but also deter the ongoing Wall Street crime wave that arises from the current culture of anything goes because no there’s no real chance of getting caught or being punished even if caught?

* How will you prevent the abuse and breach of public trust that arises from the revolving door where former SEC staff work in the private sector, but use their prior public service and inside SEC connections to get information, access and influence to serve their private clients, often the most powerful on Wall Street and often to the detriment of the public?  Shouldn’t every such contact be prohibited and require immediate full detailed public disclosure?  Shouldn’t everyone, no matter how connected or powerful, including but not limited to former SEC staff, be required to participate in the established processes that minimize opportunities for favoritism and conflicts, real or apparent?

* When passing rules, the law requires the SEC to conduct very limited economic analysis of a few specifically identified factors, which do not include cost benefit analysis.  However, the industry, some politicians and some courts have been pushing the SEC to do what they call “cost benefit analysis,” which when scrutinized is really “industry cost only analysis.”  Given that requiring this analysis is not the law, would bias rulemaking to protect Wall Street profits not taxpayers, and that so many of the benefits of SEC rules and actions, like protecting investors, the markets and financial system as well as our economy, are incalculable and unquantifiable, how will you ensure that onerous one-sided analysis not required by law is not undertaken by the agency?

* The post-Great Depression combination of laws and rules protected the country for almost 70 years before deregulation took down the multiple layers of protection between Main Street from Wall Street, which included:  (a) limiting banking activities, (b) forcing the separation of different types of banking and (c) policing by regulators.  Do you agree that such layers of protection are needed?

Also, do you understand the Volcker Rule, which limits certain high risk activities, as one of the layers of protection for the American people?

* Given that the SEC is supposed to regulate and police all of the U.S. capital markets, which are vast and vital to our economy and standard of living, isn’t the SEC grossly underfunded?  Doesn’t the SEC need a significantly greater budget, including tens of millions of dollars a year more just to upgrade its technology to keep up with the ever-changing markets?  Doesn’t the SEC need to hire hundreds of programmers, analysts, specialists and inspection, risk and enforcement staff to use that technology so that the SEC can be a 21st century agency?

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