PCAOB: SEC Is Taking Its Sweetass Time So We Are Not a Go

Just released:

In June 2008, the Board adopted and submitted for approval by the Securities and Exchange Commission rules that, among other things, require each registered firm to submit an annual report on Form 2 by June 30 of each year. The Board provided that the rules would take effect 60 days after Commission approval. The rules remain pending before the Commission for approval and will not be effective before June 30, 2009. Accordingly, there is no requirement for registered firms to file an annual report or pay an annual fee in 2009. Under the rules as adopted by the Board, the first annual report on Form 2 will be due on the first June 30 that occurs after the rules take effect, and the first annual fee, in an amount to be announced by the Board at a later date, will be due in that same year. The separate obligation to file any required special reports on Form 3 will commence as soon as the rules take effect, 60 days after Commission approval. [Emphasis ours]

Because, you know, the Commission has been busy not stopping Ponzi schemes and whatnot. Sphere: Related Content

SEC Will Soon Say It's Quality, Not Quantity

In a press release today, the Commission is charging an investment adviser with misappropriating funds from his clients.

Wait! Continue reading:

The Securities and Exchange Commission today charged an investment adviser who lives in Armonk, N.Y., for orchestrating a scheme in which he stole more than $6 million in investor funds for his own personal use, in some instances victimizing clients who were terminally ill or mentally impaired.

This guy is extra special. Nice work SEC, we've been too hard on you.

SEC Charges New York-Based Investment Adviser for Stealing Client Funds [SEC.gov] Sphere: Related Content

Somebody Is Messing with the SEC Just For Kicks

Just when you thought that the SEC had turned the corner on all this negative shit and was ready to start kicking ass and taking names (or at least get a hot date with a whistleblower), something like this happens and M. Schape and crew still remain the laughing stock:

An email sent under the name of a Securities and Exchange Commission enforcement attorney caused a commotion both at the SEC and outside it. The long message harshly criticized the agency's chairman and inspector general.

All right! Dissension in the ranks, we like it...until we learn that the alleged sender's, Irene Gutierrez, BlackBerry had been stolen/misplaced/vanished into thin flipping air. The actual sender of said email faked Gutierrez's email address.

Which leads us to ask the question: If you're the SEC, don't you go with the original critical email story? I mean, infighting at the Commission is a helluva lot better than admitting that we got duped by some hack geek, isn't it?

Think about it. People within the Commission are sending snarky emails about each other, there are shouting matches, all-night meetings, maybe some people get fired, etc. sounds like they've got their game back on track, right?

But no, they decide to tell the truth and admit that someone can't keep track of our own personal items* and somebody had some fun at their expense. Seriously, what's one more embarrassing story going to hurt anyway?

*Seriously, most people start hyperventilating when they lose their cells, am I right, people?

An Email Causes Stir at the SEC [WSJ, subscription required] Sphere: Related Content

Review Comments - 6.8.09

Making Up Values - CDO purchased for $9.50 by one Evergreen Fund was valued at $98.93 by another. Appears Reasonable. [Floyd Norris/NYT]

Baltimore: It Really Is That Bad - McNulty can only do so much...[Clusterstock]

FAS 166, 167 Putting Kibosh on Q's Expected This Week; SEC Forms Investor Advisory Committee - FEI Financial Reporting Blog Sphere: Related Content

Harry Markopolos's "I Told You So, SEC" Tour Still in Full Swing, May Have a Crush on Schapiro

In a serious case of "we heard you the first time", Harry Markopolos is still shouting from the rooftops about the SEC ignoring his warnings about Bernie Madoff's Ponzi scheme.

"'I knew it was a fraud in about five minutes', [Markopolos] said."

We get it man. You told 'em. Now go write a book and make millions so we can get on with our lives and you'll be an answer-question on Jeopardy! soon enough.

Markopolos is giving the new and improved SEC a big thumbs up though, "'[Mary Schapiro is] on fire—she has changed that agency,' Markopolos said. 'I'm really impressed.'"

Sounds like someone has a big hot crush on MSchape. Don't make it so obvious though Mark, she doesn't strike us as the type to just swoon over some whistleblower. You've got your work cut out for you.

Madoff Whistleblower Markopolos Blasts SEC [Business Week] Sphere: Related Content

I Likes Me Some Financial Regulatory Oversight

Get ready my friends, change is coming!

The Obama Administration is getting closer to rolling out some changes for the regulatory community and if you like bureaucratic, mind numbing regulation now, just wait until Barney Frank, Chris Dodd, and yes, even you, Maxine Waters, get their way.

Some of the usual suspects might not survive this thing, namely the Office of Thrift Supervision. This group of overachievers was responsible for completely ignoring overseeing AIG.

Chuck Schumer: "The Office of Thrift Supervision has very little political support given its track record".

So, unless that's politician code for, "These guys do a tremendous job of producing red tape. They're not going anywhere", it's good night nurse.

Then there's the small matter of the perverts over at the SEC and the wonks at the CFTC. Again, the general consensus is that these two were asleep at the wheel. Some want to see a merger between the two but lobbyists are saying no dice. Guess who wins that one?

Apparently the back room deal as it stands right now is that the SEC would register all hedge funds and oversee derivatives that relate to public companies while the CFTC would get commodity based derivatives. The Times claims that "many hedge funds already [are registered]" but The Gray Lady doesn't define "many". Some might say...few are registered.

So what does all this mean? It seems that the hedge funds are going to take the brunt of this, after years of worrying about the SEC putting the gun to their heads, looks like it's finally happening. If this means 10-K, 10-Q's, etc. for hedge funds, audit partners are going to par-tay.

Administration Is Near Finance Overhaul Plan [New York Times] Sphere: Related Content

Let's Talk About a Serious Topic...

...porn on work computers.

The SEC Inspector General just put out its Semiannual Report to Congress that includes the progress of the investigation into how, in God's holy name, the SEC managed to screw the pooch on this whole ponz thing with our favorite rub n' tug jailbird.

In a completely awesome coincidence, it also includes details of a senior staffer trying to access porn sites on his SEC computer:

The investigation revealed that while using his SEC computer during 17 working days, the employee received approximately 1,880 access denials for Internet websites classified by the SEC’s Internet filter as pornography.

So, at what point does a person just give up on trying to look up porn on a work computer? I mean, nearly 1,900 times? Go buy a magazine at the gas station pal.

S.E.C. Inspector Cites Progress in Madoff Inquiry [DealBook] Sphere: Related Content

Bureaucracy To Get in the Way of the Fed's Plan to Make the SEC the Red-Headed Step-Child of Government Agencies

An article over at Bloomberg today lays out some of the details about the plans being drawn up to overhaul the financial regulatory system.

Some of the plans include pretty much marginalizing the SEC to the point of irrelevance, oh with the whole missing the impending financial crisis, and the Bernie Madoff Ponzi scheme thing. Much of the oversight would go to the super-geeks at the Fed and a new regulatory body, yet to be given a ridiculous name (how about Accountants with Badges Commission, A.B.C.? Yeah! I'll take other suggestions).

Not to worry though SEC fans! The agency has plenty of powerful and well known supporters that will more than likely stifle these insidious plans. Big shots like Arthur Levitt, Chris Dodd, and money bag pensions like CalPERS and the New York retirement fund all support the SEC in its current form, just not the substance (um, really?).

Oh, but M. Schape is working on that, hiring smart people who actually might end up doing something besides going to Kinko's. Problem is, she's currently getting cockblocked by the administration on discussions of regulatory changes, which is probably a little, um, awkward.

Here's to you, fighting the good fight, SEC! Don't let the bastards get you down!

U.S. May Strip SEC of Powers in Regulatory Overhaul [Bloomberg] Sphere: Related Content

Just When You Thought You'd Never Hear About Stock Options Again...

Monster Worldwide, the company that helped thousands of used car salesmen get new jobs at Robert Half International, settled stock option backdating charges with the SEC today.

Naturally, as is uber-popular in all SEC settlements, "Monster neither admitted nor denied the charges", per DealBook.

We now return you to your regularly scheduled, fraud-related, news.

Monster Settles S.E.C. Backdating Charges [DealBook] Sphere: Related Content

The SEC Continues to Impress

So there are reports of two SEC employees being investigated for insider trading, initially reported by CBS.

So if I understand this correctly, the bureaucratic nightmare bumblefuck government agency that investigates and enforces insider trading rules has employees breaking said rules? I guess that's what happens when you have trouble filling the hours.

Authorities Probe Insider Trading At SEC: Source [Reuters/NYT] Sphere: Related Content

GAO Totally Throws Chris Cox Under the Bus

The General Accounting Office put out a less-than flattering report on the SEC under Chris Cox, saying that basically, corporate malfeasance was pretty much, not that big of a deal.

I guess one could conclude that this is a fair report since the likes of Bernie "Let's Get a Rub and Tug" Madoff and Allen Stanford are popping up all over the place.

Blaming the Bush Administration is almost like a mantra these days. Its popularity will be around much longer than the Jonas Brothers. Just sayin...

Cox’s SEC Hindered Probes, Slowed Cases, Shrank Fines, GAO Says [Bloomberg via footnoted.org] Sphere: Related Content

KPMG Might Need to Change Their Shorts

Breaking news from Dealbreaker: The SEC has filed a complaint against the operators of the Reserve Primary Fund charging them with, wait for it....fraud.

For those of you unfamiliar, this is the money market fund that "broke the buck" when Lehman imploded in September. Again, for those of you unfamiliar, money market funds are not supposed to break the buck. Does not happen. Should not happen.

It happened.

The Radio Station performs the audit for the Reserve Fund. What does this mean? Well, let's wildly speculate for a moment, shall we?

In the complaint, "a representative from KPMG LLP" (i.e. big shot partner) was in the board meetings (there were three) held on September 15, 2008, the day that Lehman filed for bankruptcy and the day before the buck breaking occurred.

It's hardly believable that the partner in charge of this engagement was clueless of the exposure that the Reserve Fund had to Lehman (although you'd be surprised). And, unless that partner was living under a rock for the six months prior to these meetings, he/she knew the pressure on Lehman was, shall we say, intense.

All this being said, what did this partner know as it relates to the complaint filed by the SEC? On an engagement of this size, partners are in contact with management constantly. If Reserve Management Company Inc. (RMCI) was not giving investors and rating agencies all the information regarding the value of the Lehman securities as the complaint alleges, are we to believe that the auditor was being lied to as well?

This had to be a HUGE issue on the engagement team at that time. Valuation is a huge risk area so it's not like the auditors weren't thinking about it. Also, if the valuation was so indeterminable, it's likely that the auditors would have been consulting with valuation specialists to determine the fair value of the securities.

New Century and now this? Radio Station might have just jumped a notch on the endangered auditing species list.

Complaint here.

Updates to come.

Breaking: Fraud Everywhere! [Dealbreaker] Sphere: Related Content

They're Conspiring to Conspire

It comes as no surprise today that Bernie Madoff's auditor is facing charges of securities and investment advisor fraud.

Today's New York Times states the obvious when talking about the "red flags":

Some of Mr. Madoff’s critics have said that the tiny accounting firm was a red flag, given the size of Mr. Madoff’s legitimate operations. The fact that Mr. Friehling also appeared to be the agent for dozens of accounts with Mr. Madoff’s investment advisory firm, according to a list of customers assembled by the trustee overseeing the firm’s bankruptcy, should have raised more red flags, they said.

Look, I know that many people that invested w/ the Bernster aren't even remotely intelligent about financial matters but c'mon... BILLIONS of dollars audited by Friehling and Horowitz?

It seems reasonable to me that there are some complicit BM (ha!) investors out there that saw that this thing was now what it seemed and said nothing. Or I could be wildly speculating...I'm sure the crack-squad at the SEC will get to the bottom of it. To be continued....

Madoff’s Accountant Is Charged With Securities Fraud [New York Times] Sphere: Related Content