December 28, 2016

A SEC Employee (Allegedly) Goes AWOL!

In my new “Broc Tales” blog (go ahead & “Subscribe” to get those stories pushed to you), I’ll eventually get around to telling wacky stories about some SEC Staffers that I worked with back in the day. I’m tickled pink that the WSJ is covering that type of sensational stuff too! Here’s the intro from a recent WSJ article:

The internal watchdog for the Securities and Exchange Commission has taken the rare step of accusing an employee of committing “attendance fraud,” saying the public official was paid $125,000 for more than 1,200 hours of work “that he did not work or account for.” The claim is included in separate reports published this year by the inspector general for the securities regulator, most recently in the agency’s semiannual report issued Nov. 14.

Why is the SEC Still So Low-Tech?

Here’s the intro from this old CNBC piece:

Wall Street movie villain Gordon Gekko executed trades on a cellphone larger than his head. Today’s traders can execute thousands of trades ina second on their iPhones. One might assume that the Securities and Exchange Commission has kept up, enforcing its rules with state-of-the-art software, algorithms, and computers.

Think again.

The SEC’s entire corporate-disclosure operation is based on the written document. For the most part, the agency collects financial information as documents, not as searchable data. Like many U.S. regulators, the SEC hasn’t kept pace with technological evolution. As a result, the firms it’s charged with overseeing are getting away with shady practices, investors are being denied easy access to key information, and, our economy is being put at risk.

To understand why the SEC’s low-tech disclosure system poses such a threat, consider the 2008 financial crisis. As the Treasury Department’s financial research director, Richard Berner, pointed out recently, “when Lehman Brothers failed six years ago, its counterparties could not assess their total exposures to Lehman. Financial regulators were also in the dark.”

The reason? Accessible data on Lehman just wasn’t available — not even to the SEC. Lehman had complied with relevant reporting requirements, but that information was trapped within thousands of documents, with no way to search across the whole. This lack of accessibility fueled a crisis that nearly toppled our financial system.

Broc Romanek