According to The New York Times, by allowing that there be exemptions to certain regulations and laws, the Securities and Exchange Commission is letting Goldman Sachs, JPMorganChase, Bank of America, and other large financial firms avoid the liability that is supposed to come with losing securities fraud lawsuits while still making it possible for them to avail of the certain advantages that make it easier for them to raise investor money.
The newspaper analyzed investigations conducted by the SEC in the last decade and discovered almost 350 instances involving the federal agency giving Wall Street firms and other financial institutions a break. In one example cited by The New York Times, although JPMorganChase has settled six securities fraud cases in the past 13 years, the financial firm has also been granted at least 22 waivers. (Waivers may grant permission to underwrite certain bond and stock sales and/or manage mutual fund portfolios.) Another example involves Merrill Lynch and Bank of America (The two financial firms merged in 2009) settling 15 securities fraud cases while being granted at least 39 waivers.
Former regulators and securities experts say that granting the Wall Street firms the waivers gave them certain powerful advantages. According to former SEC chairman David S. Ruder, without the waivers a financial firm that agrees to settle securities fraud charges could be faced with “vast repercussions” that could prevent them from staying in operation.
SEC officials say the waivers are to allow for the stock and bond markets to stay accessible to companies that have the actual need to raise capital, which they believe is just as important as protecting investors. While the SEC has taken away certain privileges in securities fraud cases over misleading or false statements that were made about a financial firm’s own business, it doesn’t do the same when a Wall Street firm faces civil charges for allegedly lying about a specific security that it created and it is selling.
Many believe that the government is continuing to be “too soft” on Wall Street—even as the SEC has toughened up its investigations against financial firms accused of alleged fraud. Recently, there have been federal judges that have spoken out against the SEC’s habit of letting financial firm’s settle by letting them promise not to violate the law again. More than half the waivers issued have gone to Wall Street firms that had settled fraud charges at least once before.
The SEC has complained that settling is more affordable for it than going to court. However, even as the Commission has turned to Congress for tougher laws against fraud as well as increased penalties, why have nearly half of the waivers it has granted gone to Wall Street firms that have settled fraud charges in the past with the promise to never violate those laws again? That’s what many want to know.
S.E.C. Is Avoiding Tough Sanctions for Large Banks, The New York Times, February 3, 2011
SEC Seeks to Impose Tougher Penalties for Securities Fraud, Institutional Investor Securities Fraud, December 29, 2011
SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Fraud, October 13, 2011
Securities and Exchange Commission Charges Investment Adviser with Committing Securities Fraud on LinkedIn, Stockbroker Fraud Blog, January 6, 2012
At Shepherd Smith Edwards and Kantas, LTD, LLP, we don’t believe in letting a financial firm get away with securities fraud as our clients are bilked of their savings and other financial resources. Contact our stockbroker fraud law firm. We represent institutional and individual clients.