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SEC Outside Investigator Should Also Look Into. . . Recommended

Posted by Larry Doyle on May 8, 2012 9:59 AM |

Perhaps it is only fitting that my 2000th post since launching Sense on Cents in January 2009 is directed at issues within our nation’s top financial cops at the SEC.

How interesting that a report is released today indicating that the SEC is bringing in an outside investigator to probe allegations of inappropriate activities within the Office of Inspector General during the tenure of the recently departed IG David Kotz. 

Bloomberg/BusinessWeek highlights this developing story in reporting, SEC Hires Investigator to Probe Complaints about Watchdog,

The U.S. Securities and Exchange Commission is planning to hire an outside investigator to probe complaints about the agency’s internal watchdog unit after its top official stepped down amid complaints about his work.

“An individual has raised allegations of misconduct by former and current employees in the office of inspector general,” John Nester, an SEC spokesman, said yesterday in an e-mail. “The matter was promptly referred to the Council of Inspectors General on Integrity and Efficiency. We are also in the process of hiring an independent investigator to review the claims.”

Is that right?

Well, given that Sense on Cents embraces our prized virtues of truth, transparency, and integrity, and has had a LOT to say about the SEC and its cousin FINRA over the last few years, I am compelled to make the following comments.

1. If in fact there is/was serious cause and reason to believe that there was inappropriate activity, especially of a sexual nature, then certainly these activities should be thoroughly addressed and properly adjudicated. THAT SAID. . .

2. To think that this may not be some sort of payback to former SEC IG David Kotz for his aggressive approach in exposing shortcomings and failures within the SEC would be exceptionally naive.

Having been privy to cases of alleged inappropriate activity brought by female members of staff at Bear Stearns and JP Morgan, I can assure you that truly legitimate cases within this realm are severely hindered by the fact that trumped up charges are given the time of day and token payoffs are made to make the charges and people go away.

In the spirit of charity, and given that the SEC is charged with overseeing FINRA, perhaps we could implore the SEC’s new outside investigator to direct some time and effort to also explore the following:

1. FINRA’s liquidation of auction-rate securities in 2007 prior to that market freezing in February 2008. Never addressed.

2. Allegation in Standard Investment Chartered v FINRA that  Ms. Schapiro et al LIED in the proxy statement used for the merger of NASD and NYSE regulatory arm to form FINRA. Serious charge no doubt and never got the proper attention in the courts or the media. Mary, can you help the outside investigator on this one? Thanks a lot.

3. Allegation that FINRA had invested its own funds in Madoff as included in Amerivet v FINRA.

4. Allegation that the Department of Justice had kept the SEC at bay while Allen Stanford plied his trade and propped his Ponzi scheme.

5. A thorough and exhaustive review of Ms. Schapiro’s and FINRA’s relationship with Bernie Madoff as was overwhelmingly requested by FINRA’s own member firms at its 2010 annual meeting. Much appreciated here as well, Mary.

6. A thorough and exhaustive review as to what SEC and FINRA officials were doing at and inside Lehman, Bear, Merrill, as these firms went down.

I think these investigations should keep the new outside investigator busy for a while. Quarterly progress reports seem reasonable?

I mean, last I checked the SEC is an agency of the federal government and is supposed to work for “We the People” so these requests of the outside investigator do not seem overly burdensome. Actually given the number of lawyers looking for work, perhaps the Obama administration could include these jobs in next month’s employment report.

The old “two birds with one stone” trick. Nice.

Who’s with me on this?

Comments, questions, constructive criticisms encouraged and appreciated.

Larry Doyle

Isn’t it time to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook?

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Peter Sivere

    Congrats on 2,000.

    The SEC has ordered an independent inquiry into allegations of sexual misconduct by current and former staff working for its office of the inspector general.

    Sour grapes. David Kotz rightfully embarassed the SEC with his in depth investigations. If the allegations are ture, it is at best an HR issue.

  • Ivana Boastsky

    Fairly certain there was an “inappropriate” relationship with a subordinate.

    People who live in glass houses should not throw stones.

    Kotz made a big deal out of less than .5% of the SEC employees surfing porn. Hmmmmmmmm, at least they weren’t dipping their pens in the company ink well.

  • Peter Sivere

    SRO’s may be immune from private lawsuits but lawyers are licensed by the states and are not immune from disbarment. If there is proof she lied in the proxy, it should be brought to the attention of the appropriate disciplinary committee and her license to practice law yanked forever.

  • Peter Sivere

    If you believe your lawyer has acted in an unethical manner, you may file a complaint with the Office of Bar Counsel, 515 5th Street NW, Washington, DC 20001, or call 202-638-1501. Bar Counsel will investigate your complaint and make a determination whether to prosecute the lawyer. More information on the Office of Bar Counsel and filing a complaint is available on the D.C. Bar’s Web site.






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