Is SEC Chair Mary Schaprio Shaking Down Wall Street?
This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.
On the morning of last week's frightening downward spiral in US stocks, SEC Chair Mary Schapiro spoke before a roomful of legal and compliance professionals in DC. What was the big issue that the SEC was going to tackle, according to Ms. Schapiro? 12b-1 fees! According to Schapiro, this age-old mutual fund distribution topped her to-do list.
Computer trading and lack of coordination about among exchanges wasn't on the list, nor was an announcement of a broad-based witch hunt among the largest Wall Street firms, but those pressing issues seem to be atop the SEC's priorities today.
It seems rather amusing that the SEC is just now trying to address the issue of breakdowns among exchanges. Gee, we've only been talking about computer-based trading programs since...1987! This is typical SEC reactive behavior-wait until there is a terrible accident at a known dangerous intersection and then build the traffic light necessary to prevent the next one.
And while I'm not particularly in the mood to defend any of the big investment banks, the Goldman Sachs filing, followed by today's leak about Morgan Stanley's foray into CDO's seems practically Spitzer-esque in the "shake-down" department. From the Wall Street Journal:
Federal prosecutors are investigating whether Morgan Stanley misled investors about mortgage-derivatives deals it helped design and sometimes bet against, people familiar with the matter say, in a step that intensifies Washington's scrutiny of Wall Street in the wake of the financial crisis.
I put the emphasis on the last sentence because here's what I think is happening: not unlike the shake-down of research analysts after the technology bubble and crash, the SEC is ratcheting up the heat and may be moving towards a major multi-firm settlement that will, in one fell swoop, re-energize the SEC and restore its badly tarnished reputation. Stay tuned for future filings-my guess is that Deutsche Bank could be the next one on the list.
Jill Schlesinger is the Editor-at-Large for CBS MoneyWatch.com. Prior to the launch of MoneyWatch, she was the Chief Investment Officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.
