Talk Back

by Jessica Holzer

Dow Jones Newswires

WASHINGTON (Dow Jones)–Securities and Exchange Commission Chairman Mary Schapiro said Friday budget constraints were hampering the regulator’s ability to enforce U.S. securities laws, in her bluntest remarks yet on the resource strain facing the agency.

Schapiro, speaking at a legal seminar in Washington, D.C., said the budget strain was forcing market analysts to use decades-old technology to “monitor trading that occurs at the speed of light.”

She also suggested that data-management systems and a digital forensics lab were on the chopping block unless Congress acted to increase the regulator’s budget.

Also, she indicated the agency didn’t have the funds to hire the market experts it needs to keep ahead of fraudsters and manipulators.

The SEC was tasked with wider responsibilities by the Dodd-Frank financial law, but Congress hasn’t increased the agency’s budget.

With Republicans back in control of the House of Representatives, the prospects for a boost in the agency’s funding have dimmed significantly.

House Republicans on Friday unveiled a plan that would slash nondefense, discretionary spending for the rest of the year by 9%, a cut of $43 billion compared with 2010 levels. The plan didn’t contain details about cuts at specific federal agencies.

Continue reading…

   By Suzanne Barlyn
   A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones)–It’s getting trickier for federal lawmakers to oppose a fiduciary standard that would protect the retail investor, especially when their sympathy now extends to the institutional investor.

Recent legislative proposals would establish a fiduciary duty for brokers who advise certain institutional investors, mainly states, municipalities and public pension funds. That is, those brokers would have to act in these investors’ best interests.

The initiatives stem from the recent Goldman Sachs mortgage derivatives case and the company’s insistence that it did not need to take the side of “sophisticated institutional investors” to whom it sold risky products. Civil fraud charges were filed last month against Goldman Sachs Group Inc. (GS) by the Securities and Exchange Commission and high-profile hearings by a Senate panel put the company’s executives in an unpleasant spotlight.

Continue reading…

By Neal Lipschutz

A DOW JONES NEWSWIRES COLUMN

At least for the day, the most powerful man in the U.S. financial industry and for equities markets is 82 years old, a man who ended his leadership of the Federal Reserve more than 20 years ago.

But Paul Volcker is back. Big time. Reportedly on the margins of the Obama administration even in his current role as an adviser, “the tall guy behind me,” in the words today of President Barack Obama, is back on stage figuratively and literally.

As the president announced two major initiatives that would radically change the world of America’s big banks, he was flanked by Treasury Secretary Timothy Geithner and adviser Larry Summers. He also had with him two key Congressional leaders, Rep. Barney Frank (D., Mass.) and Sen. Christopher Dodd (D., Conn.).

Continue reading…

By Suzanne Barlyn
A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones)–A surge in arbitration claims over private placements is raising a good question: Shouldn’t someone raise the income and asset thresholds that were designed to ensure that these largely unregulated securities are marketed only to institutions and well-heeled, sophisticated investors?

The answer would seem obvious, considering that these thresholds were set more than 20 years ago.

Continue reading…

These are the personal views of David B. Loeper, a certified investment management analyst, and the chief executive of Financeware, an investment adviser in Richmond, Va., registered with the Securities and Exchange Commission. He is also the author of several books, including “The Four Pillars of Retirement Plans” and “Stop the 401(k) Rip-Off.”:

Legislators and regulatory agencies are building momentum to require that brokers be held to the standard of a fiduciary under the auspices of consumer protection. As a consumer advocate, I applaud both the idea and objective but I fear that if brokers are held to this standard it will not materially protect consumers.

Discount brokers that permit individuals to day trade their wealth away are staunch adversaries to this regulatory proposal because their business model is to just follow the consumer’s instructions. In theory, they don’t give advice or sell anything. Every trade they make (supposedly) is non-solicited. Continue reading…

By Kristen McNamara
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–A draft financial-service reform proposal unveiled Tuesday by Sen. Christopher Dodd (D., Conn.) won applause from financial advisers and state regulators.

“The draft legislation’s treatment of issues that would directly affect investment advisers represents a very thoughtful and knowledgeable approach,” the Investment Adviser Association said in a statement.

The 1,100-plus page document circulated by Dodd, chairman of the Senate Banking Committee, calls for brokers who act as investment advisers–meaning those who provide ongoing investment advice–to register as investment advisers and be subject to the Investment Advisers Act of 1940. This would include a fiduciary duty to act in their clients’ best interest.

Continue reading…

When Charles Satterfield joined Stanford Financial Group in 2005 as managing director of fixed income, he had no idea this meant peddling Certificates of Deposit.

“They wanted to tie my compensation directly to sales of the bank CD,” said Satterfield, a fixed-income investment strategist.

“When grandma came in and wanted stability and a little bit of income, my answer was supposed to be, “Oh, the bank CD.” “When a young guy came in and wanted to grow his principal, my answer was supposed to be, “Oh, the bank CD.” “No matter what the question was, I was supposed to answer, “the bank CD.’” Continue reading…

 By Suzanne Barlyn 
A DOW JONES NEWSWIRES COLUMN 

NEW YORK (Dow Jones)–A former Securities and Exchange Commission lawyer who investigated Bernard Madoff in 2004 says the new report on how the agency failed to uncover his massive fraud places too much blame on staff examiners and overly generalizes about their “inexperience.”

Genevievette Walker-Lightfoot told Dow Jones Newswires on Thursday the SEC inspector general should have focused more of his attention on how supervisors, rather than the staff examiners and investigators, handled the agency’s many stillborn probes of Madoff.

An executive summary of the report, released on Wednesday, repeatedly emphasized what it described as the inexperience, confusion and limited expertise of staff assigned to at least six investigations involving Madoff since 1992.

Continue reading…

NEW YORK — The Securities and Exchange Commission’s agreement with Hank Greenberg marks the second time in a week the agency has announced, simultaneously, charges and a settlement in a serious matter involving misled investors.

It says the truth is being served. Not everyone agrees.

In fact, the pacts raise questions about how much — or how little — the public will ever know about events that may have contributed to one of the most serious financial crises in U.S. history.

In Thursday’s announcement, the SEC says it charged Greenberg, former chairman and chief executive of AIG, and Howard Smith, the company’s former vice chairman and chief financial officer, with accounting violations over inflated financial results reported by AIG between 2000 and 2005.

Continue reading…

By Neal Lipschutz
   A DOW JONES NEWSWIRES COLUMN 

The fine imposed on Bank of America Corp. for allegedly misleading investors about big bonuses it agreed could be paid to Merrill Lynch & Co. executives just before the struggling Merrill was subsumed into BofA illustrates the Securities and Exchange Commission’s punishment conundrum.

There’s no doubt the BofA action, or lack of disclosure, is a serious matter. Yes, it was a frantic time in the annals of American capitalism. The system was rocked. Still, basic tenets of shareholder rights, such as disclosure of material information, must always be respected.

Imagine the position of a theoretical, long-time shareholder of Bank of America. He was an owner when the merger was coming together. He is  frustrated and angry by the SEC’s allegations against Bank of America.

Continue reading…