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Robert Trigaux

Analysis: Wall Street firms promise SEC repeatedly not to break rules, then do so anyway




In Manhattan, an elderly group leads a recent march up Broadway. Occupy Wall Street protesters are raging against corporate greed and social inequality. AP photo

Wake up and good morning. Wall Street's image is all about making megabucks and oozing lots of machismo in deal making. But when it comes to policing wrongdoing on Wall Street, it's more like a kindergarten where a teacher says Now promise me you won't do that again.

Yes, teacher...

A New York Times analysis is out that shows nearly all of the biggest financial companies — Goldman Sachs, Morgan Stanley, JP Morgan Chase and Bank of America among them — have settled fraud cases by promising that they would never again violate an antifraud law, only to have the Securities and Exchange Commission conclude they did it again a few years later. St. Petersburg-based Raymond James Financial is included in this analysis.

The New York Times analysis of enforcement actions during the past 15 years found at least 51 cases in which the SEC concluded that Wall Street firms had broken anti-fraud laws they had agreed never to breach. The 51 cases spanned 19 different firms.

Let's cut to the chase. Regulators that (occasionally) catch wrongdoing then simply ask powerful financial firms not to do it again are a big reason we're in this mess as a country. If regulators can't enforce the laws, why should Wall Street firms that profit by breaking laws bother to follow the rules?

Wall Street firms have learned it's better to break rules repeatedly if there's profits to be made, then apologize (and even pay a fine) later.

Here's an eye opener. According to the New York TimesJudge Jed S. Rakoff of the Federal District Court in Manhattan, a critic of the SEC, on Wednesday is supposed to review a settlement reached by the SEC with Citigroup. The issue? Citigroup agreed to pay $285 million to settle civil charges that it had defrauded customers during the housing bubble, and then pledged to the SEC it would never violate one of the main antifraud provisions of the nation’s securities laws. (Isn't it supposed to follow the law without such pledges, anyway?)

The problem? Citigroup had agreed not to violate the very same antifraud statute in July 2010. And in May 2006. Also as far as back as March 2005 and April 2000.

Judge Rakoff has asked the agency what it does to ensure companies do not repeat the same offense, and whether it has ever brought contempt charges for chronic violators.

Here's the eye opener: The SEC said in a court filing Monday that it had not brought any contempt charges against large financial firms in the last 10 years. Read the entire New York Times story here.

Well, that ought to show Wall Street who''s the boss...

Any wonder there's such pessimism out there. And a little thing called Occupy Wall Street?

-- Robert Trigaux, Business Columnist, St. Petersburg Times


[Last modified: Tuesday, November 8, 2011 6:58am]


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