“Barks Like a Mouse and Bites Like a Flee”
Of all the blows dealt to the SEC this week by Madoff tipster Harry Markopolos in his Congressional testimony, that’s the one sound bite that will stick with me. Mr. Markopolos gave a startling description of the ineptitude he faced at the SEC as he tried to expose Bernie Madoff as a scam artist. He gave specific examples of the SEC’s failures - from conflicts of interest to infighting and from territorialism and apathy to outright ignorance. Mr. Markopolos went so far as to name names, as they say.
Based on his testimony, new SEC Chairperson Mary Schapiro has no choice but to clean house. She will also need to address a number of other challenges, namely, she needs to put an end to the SEC’s penchant for parallel investigations with the U.S. Attorney’s office. The SEC doesn’t need to tag along to their cases. They need to pursue their own cases and select ones that have broad impact, not these celebrity cases that grab a headline or two (Mark Cuban, Martha Stewart, etc.).
There’s no doubt we can expect a significant amount of new blood at the SEC. That’s a good thing but these individuals need training, and a lot of it. Volunteer oversight committees could be one solution. Lawyers, investor advocates, watchdogs…and yes, even industry representatives (the honest ones), should visit monthly with the SEC and download the latest information in terms of technology, trading, investment products, scams, etc. I, for one, would be more than happy to lend my time to such a worthy endeavor.
Congress got a huge wake-up call today. Expect big changes at the SEC.
Jacob ("Jake") H. Zamansky is one of the country’s foremost authorities on securities arbitration law, the legal recourse for investors claiming broker wrongdoing, or for brokers claiming wrongful termination or other misconduct by their employer. Zamansky & Associates, the New York-based law firm he founded, represents both individuals and institutions in complex securities, hedge fund, and employment arbitrations.
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