SEC Shame

By: Mike_Stathis

Many of you who have followed me and read my most recent books (The Wall Street Investment Bible/2009 and America’s Financial Apocalypse/2006 & 2007) know that I feel the SEC is beyond useless. In my opinion, the agency works for Wall Street.

As a financial professional and former direct employee working for Wall Street, I saw how they operate. They pick on the little guys; the brokers who often commit minor violations that affect very few, while turning their heads away from the biggest criminal activities affecting most if not all investors. In this manner, the SEC creates the impression that they are doing their job and that they are competent.

This could not be further from the truth. In the best of situations, SEC officials only act once outsiders deliver evidence of fraud, as was the case of thousands of corporate scandals, including the back-dated options mess, after hours trading by mutual funds, and many others. In the worst of cases, they allow massive fraud to continue despite several years of warnings from outside experts, as was the case with Bernie Madoff’s Ponzi scheme.

But the shame at the SEC continues to mount. Last year, the SEC Inspector General issued a report that found SEC employees watching porn, trading stocks and other alarming activities while at work. This is just one of the reasons why the SEC rarely catches the really big cases of securities fraud.

http://www.sec-oig.gov/Reports/Semiannual/2008/seminov08.pdf

Right around the same time last year, the SEC charged Mark Cuban with insider trading.
http://www.sec.gov/news/press/2008/2008-273.htm

Cuban claimed that these allegations served as a means of retaliation due to his criticisms of the SEC. While I am certainly no fan of Cuban, I would tend to agree with his claims. Cuban reacted in his predictable manner, lashing out at the SEC, and claiming they were the ones guilty of insider trading.

Ironically, just a few days ago, the Inspector General issued another report detailing allegations of insider trading by two SEC attorneys. 

http://www.ft.com/cms/s/0/7a857f50-419b-11de-bdb7-00144feabdc0.html

For several years now, I myself have made many calls the SEC officials to voice my concerns and raise criticisms about the incompetence and negligence of the agency. I have also made numerous complaints regarding violation of securities laws. Yet, nothing has been done. Despite these discouraging results, I continue my efforts to this day. I would say that many attorneys know me by name.

I even addressed the problems at the SEC briefly in my 2006 book “America’s Financial Apocalypse.”

“And of course we cannot forget the SEC, which focuses most of its efforts on small-time crimes as a way to create the perception that it’s policing the securities markets.  Widespread fraud continues at the highest levels on Wall Street and corporate America on a daily basis. In almost every major case of Wall Street and corporate fraud, the SEC has acted only as a reactive investigator after someone else discovered the deceit. This has been true in the accounting scandals with Enron and WorldCom, hundreds of other accounting scandals, stock options backdating, mutual fund and market maker trading fraud, and virtually all other scandals that affect millions of shareholders.

Rather than focusing on the major crimes, such as illegal activities of market makers, fund managers and traders, floor traders, Wall Street firms, and corporate insiders, the SEC operates with the mentality of ‘You might be doing something wrong but don’t let us know about it or we will investigate.’
The SEC should be constantly probing head figures that influence the capital markets because they’ve been getting away with criminal activities for decades. The passage of the Sarbanes-Oxley Act has had only a minor impact, with much more bark than bite. The fact is that things haven’t changed and they probably never will. It’s still business as usual on Wall Street. As with everything else in America, big money makes and breaks the rules.”

I continue:

“Because companies know better than anyone what their short-term fate will be, they are truly the ultimate insiders. Corporate treasury departments can time the purchase and sale of their stock as long as they abide by certain minimal restrictions mandated by the SEC. Hence, unknowingly, shareholders lose when companies purchase treasury stock.  Yet, the SEC has allowed this practice ever since inception.

As well, there are very few restrictions for insider purchases of company stock. Don’t you think CEOs and CFOs know their company’s business prospects over the next few years? Of course they do. But the holding period for stock options execution is remarkably short. This legalized insider activity by has accounted for the bilking of billions of dollars from investors. Yet, in most cases, the timely liquidation of stock options is transacted legally, although representing an unfair advantage and what I consider legalized insider trading.”

Finally, in October 2008, I submitted a (not yet publicly released) formal complaint to the SEC regarding insider trading (the most blatant case I have seen in my career) and illegal shorting of Washington Mutual by certain large banks and hedge funds via the prime brokerage units of these banks. At the end of this report, I made my criticisms of the SEC clear.

Just a couple of months later, Madoff’s Ponzi scheme was exposed, but of course not by the SEC. I present my closing statement to the SEC from this report. http://www.avaresearch.com/article_details-197.html

NOTE: I continue to face widespread censorship for the cold hard truth I speak, as I see it. My intention is to wake the people up so they will realize just how useless and deceitful the mainstream media is.  I ask that you do your part to help with this mission by emailing my articles to your friends and adding the articles to the various online syndication options provided at the top right-hand side of each article. Together, we can make a difference.

I want to encourage all who seek the truth and valuable guidance to follow me to my new site www.avaresearch.com . You won't see me pitching gold or investments to you like others. You will continue to receive nothing but unbiased top-tier insight, education and commentaries.

By Mike Stathis
www.avaresearch.com

Copyright © 2009. All Rights Reserved. Mike Stathis.

Mike Stathis is the Managing Principal of Apex Venture Advisors , a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy. In the public markets he has assisted hedge funds with investment strategy, valuation analysis, market forecasting, risk management, and distressed securities analysis. Prior to Apex Advisors, Mike worked at UBS and Bear Stearns, focusing on asset management and merchant banking.

The accuracy of his predictions and insights detailed in the 2006 release of America's Financial Apocalypse and Cashing in on the Real Estate Bubble have positioned him as one of America's most insightful and creative financial minds. These books serve as proof that he remains well ahead of the curve, as he continues to position his clients with a unique competitive advantage. His first book, The Startup Company Bible for Entrepreneurs has become required reading for high-tech entrepreneurs, and is used in several business schools as a required text for completion of the MBA program.

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