Due to this partial shutdown of the federal government, the SEC is Currently working with a skeleton crew and can not perform its essential job: protecting markets and investors.
“Powerful Thursday, Dec. 27 and until further notice, the agency is going to have an extremely limited number of staff members available,” according to the SEC’s site. “The SEC has personnel available to respond to emergency situations involving market integrity and investor protection, including law enforcement.”
This type of statement fails to exude confidence. Investors are clearly less protected than they were prior to the work stoppage.
The SEC’s current condition is harmful for investors and bad news for The investment information industry, which took a severe blow to its reputation following the massive Bernie Madoff Ponzi scheme and is still laboring under the shadow of the titanic fraud.
The authorities shutdown implies that Ponzi schemes the SEC was going to Bust will remain open for business, continuing to damage the elderly. The authorities shutdown means SEC lawsuits against financial institutions committing fraud won’t be registered.
The timing couldn’t be worse. As this column noted in October, big-time investment fraud is back.
Only last month, The SEC stated it charged 13 individuals, such as a former financial journalist, together with unlawfully selling the securities Woodbridge Group of Companies, a $1.2 billion Ponzi scheme that dropped in December 2017 and filed for bankruptcy. In November, the SEC fined the former CEO of Woodbridge, Robert Shapiro, $120 million to settle allegations that he defrauded investors from the strategy.
And the SEC and the U.S. Attorney’s office in July Said they were investigating an alleged fraud known as Global Capital, a firm that raised $283 million from shareholders to produce short-term small business loans. The money was increased, at least in part, through a network of unregistered brokers and financial advisors.
(Please note, the 1 Global Capital loan business is another, Unrelated business from 1st Global Capital Corp., an independent broker-dealer established in Dallas.)
A telephone Wednesday afternoon to the SEC’s press office seeking comment wasn’t returned.
The government shutdown, which began on Dec. 22, seemingly had an Almost immediate impact on the SEC. According to the bureau’s site, it has not filed a police action against a firm or person since Dec. 26.
Rep. Maxine Waters, D-CA, chairwoman of the House Committee on Financial Services and not a favorite of many who operate in the financial services sector, said on Wednesday the government closure opened the door for poor actors looking to commit fraud.
“This president has all but closed the doors of the SEC, furloughing 94% of the agency and basically providing fraudsters and schemers using a free pass to swindle investors and small businesses,” Ms. Waters said in a statement. “With such a skeleton crew of less than 300 employees, the SEC cannot possibly oversee the activities of their over 26,000 registered entities, such as investment advisers, broker-dealers and stock markets”
She added:”Worse, the SEC is unable to hold bad actors accountable Through many enforcement actions, preventing harmed investors from getting relief.”
If the SEC can get back to work over the next week or two, the risk To the public could be real but much less serious if it stays closed for the next several months, 1 attorney said.
“When the SEC is shut down for Many months, then there will be severe Issues in the securities market,” stated Brandon Reif, managing partner of his eponymous law company. “You will see a good deal of fraud and the commission will not have the time or resources to research. The rest of the employees won’t be able to pick up this workload. It is very dangerous not to possess the watchdog keeping your eye on the securities markets.”
If the SEC’s staff Does not get back to work soon, investors and the financial information industry are sure to suffer. A government shutdown, especially one which goes on for weeks, has only 1 result.
Tom Barron has Bachelors Degree from Michigan State, MBA from University of Miami and worked as equities trader for Bank of America. When he is covering investment news, he is spending time with his family. Hobbies include golf and travel.