Sense on Cents

Add Peter Sivere to the list of people totally screwed by the Wall Street-Washington incest.

The incestuous nature of the Wall Street-Washington relationship runs across many segments of our financial landscape. That said, the corrosive nature of this incest is most egregious within those institutions charged with protecting investors, that is the SEC and FINRA.

The SEC and FINRA failed the Madoff investors, the Stanford investors, and ultimately the country as a whole. I firmly believe the financial regulatory system failed to perform because it was in bed with the industry and served at its behest. To what extent are the regulators still in bed with the industry? That question is not rhetorical? FINRA, Wall Street’s self-regulator, is funded by the industry. How has that inherent conflict worked? Not very well.

While the SEC and FINRA might promote that they are working to address areas where they have failed investors in the past, who within these institutions has ever been held accountable for their massive failures? To this end, let’s address how the SEC blew the cover of Peter Sivere, then of JP Morgan.

Who is Peter Sivere? Peter Sivere worked within the compliance division of JP Morgan. He unearthed and reported evidence of potential improprieties within JP Morgan to the SEC. In the process of this ‘whistleblower’ action, Sivere assumed he would have been protected by the SEC. Was he? Let’s read a report from The Washington Post,  At SEC, System Can Be Deaf to Whistleblowing:

Sivere worked in the compliance office of New York investment bank J.P. Morgan Chase. As part of a team helping the bank furnish documents related to a 2004 SEC probe into suspected illegal trading, he found an e-mail that he thought was incriminating. According to a subsequent report by the SEC inspector general, the e-mail said J.P. Morgan was knowingly providing hundreds of millions of dollars in credit to a firm “in the business of day trading mutual funds” — which is illegal.

Sivere asked his superiors if this e-mail had been turned over to the SEC but did not get an answer. Instead, he was taken off the SEC project, according to the inspector general report. Sivere accessed his superiors’ e-mail accounts to retrieve relevant e-mails, then contacted the SEC. He told the agency that he had relevant documents and asked whether he could receive a reward. He was told he was not eligible, but he turned over the documents anyway.

Sivere informed J.P. Morgan that he had contacted the SEC. The company fired him, partly on the grounds that he had “sought payment from the SEC to provide documents and information to them outside of the normal scope of their investigation,” according to a letter company lawyers wrote defending his dismissal. J.P. Morgan declined to comment for this article.

Sivere was shocked to learn that J.P. Morgan knew he had inquired about a bounty. He had been promised that his discussions with the SEC were confidential.

An SEC internal probe found that an investigator working on the case disclosed Sivere’s information to J.P. Morgan’s lawyers, violating the agency’s confidentiality rules. The inspector general recommended that the SEC official who made the disclosure be referred for disciplinary action. None was taken, according to agency documents.

Did Sivere deserve to get fired? That is not the point. He was given up by the SEC. That is the point.

What happens when people are not held to account? Bad business practices continue, other people fail to provide information, and our country suffers. Mary Schapiro may believe she and these institutions (SEC and FINRA) can move forward. The problem, though, is that Mary herself is a career regulator, has proven herself incapable of creating real change, and is a product of the incest if not truly a participant.

As for Peter Sivere, who is looking out for him and others like him?

Look who commented in an October 2008 Shifting Careers column in The New York Times,

October 12, 2008
9:18 am

How about in cases where doing you job gets you fired?

— peter sivere

High five to a loyal Sense on Cents supporter for bringing this story to my attention.

LD

This entry was posted on Friday, January 22nd, 2010 at 10:14 AM and is filed under General, SEC. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.