The SEC in Action… err, Partial Action

The media are now piling on the SEC and the Madoff failure, something that we highlighted last week.

Reporting to the SEC

We suppose that other investment advisors have made reports to the SEC.  We have done so on two occasions.  In both cases there was a slam-dunk violation of the '33 Act, a stock offering that was obviously fraudulent, not meeting the terms of the Act.

The SEC does not respond to reports — not at all.  There is not even an acknowledgment.  In one of our reports, the illegal fund was quickly closed down.  The reported losses were in the tens of thousands, but who knows how much it really was.  We have no idea whether our report was instrumental, but the timing suggested that it was.  The other guy continues to operate, taking very small amounts from many people.

There is no accountability about how the agency handles or sets priorities on reports.  In such an environment, one wonders why they have not sought greater appropriations.  This is one of our complaints.

Fiddling While Rome Burns

On the one hand, we know that the Madoff problem was missed.  SEC Chair Cox is now calling for an investigation of his own agency!

Meanwhile, jck at Alea notes the action against National Lampoon for stock manipulation.

Our Take

Going beyond the rather obvious irony, there is a broad quesiton about enforcement.  It should be aggressive enough to provide a deterrent.  The National Lampoon case addresses rampant manipulation in penny stocks, a deserving target.  The net is obviously not broad enough.  One step might be to have a formal acknowledgment of complaints.  At least this would provide an audit trail of decisions.

The Obama Administration faces a big challenge in restoring faith in market regulation.  Here is the latest report on possible SEC candidates.