SEC Fraud

I personally think McCain’s call to fire the SEC chair was a little extreme, plus it doesn’t hurt to benefit from hindsight. I think that all that you can expect from the SEC is to police under the rules you have and write new rules to respond situations that present themselves. No one can see the future and it’s unfair to expect Christopher Cox, who is human, to anticipate the future. I didn’t see McCain complain about naked short selling until after it was popular to do so.

The SEC issued a statement listing all the decisive actions it took in response to the market and they are pretty comprehensive:

• We adopted a package of measures to strengthen investor protections against naked short selling, including rules requiring a hard T+3 close-out, eliminating the options market maker exception of Regulation SHO and expressly targeting fraud in short selling transactions.
• We issued an emergency order to enhance protections against naked short selling in the securities of primary dealers, Fannie Mae, and Freddie Mac.
• We announced emergency plans for a rule to ensure public disclosure of short selling positions of hedge funds and other institutional money managers.
• We have undertaken sweeping enforcement measures against market manipulation.
• We provided guidance to banks about how to account for credit support of money market funds.
• We’ve written rules to strengthen the regulation of credit rating agencies, and performed examinations that have led to new rules to reduce rating agency conflicts-of-interest.
• We brought a landmark enforcement action against a trader who spread false rumors designed to drive down the price of stock.
• We have initiated exams of the effectiveness of broker-dealers’ controls to prevent the spread of false information intended to manipulate securities prices.
• Our Enforcement Division announced what will be the largest settlements in the history of the SEC for investors in auction rate securities who bought auction rate securities from Merrill Lynch, Wachovia, UBS and Citigroup.
• We entered into a Memorandum of Understanding with the Federal Reserve, to make sure key federal financial regulators share information and coordinate regulatory activities in important areas of common interest.

Statement From SEC Chairman Christopher Cox [ SEC.gov ]