Who Is the SEC Supposed to Serve?

In a recent Reuters article, the Securities and Exchange Commission was told to not revive the uptick rule.

The article quotes:

"Financial professionals, academic experts and the U.S. broker-dealer watchdog agree the Securities and Exchange Commission should not reinstate its old uptick rule to regulate short selling but disagreed on what other measures would be effective."

In other words, all industry insiders are saying "don't bring back the uptick rule, but the other alternatives are not effective either."

The key here is that all people saying this are "financial industry insiders." Even the academics and FINRA should be considered insiders because they make their living off the interactions and workings of the financial industry (as opposed to your hapless ordinary teacher or fireman who has seen their 401K savings decimated by short selling by hedge funds).

Again the argument is the same:

"Dan Mathisson, managing director at Credit Suisse, said the old uptick rule was completely ineffective."

So again, and this maybe is obvious to most people with common sense, "if it is ineffective, why are you so much against it"? Something is just not right in their arguments.

However, the bigger question is "who is SEC supposed to protect?" The common citizen or the financial industry insiders? Why is the SEC asking for opinions and considering the feedback of the very people they are supposed to regulate?

What is concerning above is FINRA itself is against the uptick rule revival. This is the same FINRA that the current SEC chairman was leading just a few months back.

So the question remains, who is the SEC supposed to protect? I am not sure about the answer anymore and hence to hedge my investment in financials, I have bought a small number of SKF for the first time ever.

Disclosure: Long SKF

Comments

[Tom Armistead]

The SEC can accurately be described as a captured regulator. It serves those whom it should regulate.

Enforcement actions are few, typically p/r type cases for insider trading by the likes of Mark Cuban and Martha Stewart. These are intended to placate the general public and make us feel safe investing in the Wall Street casino.

Bear Stearns and Lehman were regulated by the SEC as CSEs, as was Citigroup. The SEC's mssion, when it was founded by the Securities and Exchange Act of 1934, was to prevent manipulation and speculation, thus providing safe and stable markets.

Mission not accomplished.

2009 May 06 09:27 AM

[Gaucho]

You are right, do not just bring back the uptic rule but also implement the European system. In that system the seller does NOT get the cash UNTIL the shares have been delivered. This will eliminate the printing of fake shares IE NAKED SHORTING. Look at the carnage of LEN and BSC with a few 100 million shares NOT delivered. This crap is way into the RICO statutes.

2009 May 06 09:51 AM

[HBWOW]

The SEC is merely a overpaid group of "look the other way" representatives of the insiders and investment firms who cost the public far, far more in their "look the other way" oversights than the total cost of the SEC annual budget. Now and then they make the news with a random culprit charged and the result is the culprit is
slapped on the wrist, and his (her) company is fined by the SEC, ie the public stockholders absorb the crime and take the punishment .
Our government is action, once again.

2009 May 06 01:11 PM

[History Buff 24/7]

Beyond worrying about who the SEC is supposed to protect, there's also the issue of how they are doing it. Just two words.

Bernie Madoff.

I rest my case.

2009 May 08 11:13 AM

[john s. gordon]

madoof's questionable enterprise was brought to the attention of SEC staff by certain people.
since SEC & regulators in general had been told by the bush whitehouse during 2001-2008 not to regulate anything, there was no action but there were a lot of z's floating up to the ceiling.
> jack

2009 May 09 09:20 AM