

Why does the SEC prosecute companies instead of people? - cwan
http://www.thebigmoney.com/articles/explainer/2009/09/22/ghosts-market-machine

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steveplace
You're assuming they prosecute at all. They're quite inept at their job given
the amount of funding that is poured into the organization.

Example: Perot Systems gets bought out Monday by Dell. The week prior we see
2500 calls bought at the offer for $1, and on Monday they traded at 9.60. Do
note that the calls were an unusual volume anomaly in the name.

This trade data will most likely be looked over by the SEC.

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jhancock
I'm guessing the SEC is both underfunded && following political direction.
They may have needed more funding to go after all the potential illicit
trading the last 10 years or so, but it seems they could have gone after more
than they did. I find it very interesting the SEC did not touch Madoff until
the end of 2008 when there seem to be strong warnings several years earlier.

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ulf
Prosecuting individuals would be a step in the right direction. As long as an
enterprise is successful, the leaders take full credit and get a shitload of
bonuses, justified by the tremendous amount of responsibility.

As soon as everything goes downhill, they return to being employees, cashing
out a nice severance on their way to the next gig...

edit: Core problem remains the personalization of success along with the
socialization of failure.

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andylei
maybe. but also consider that if the SEC can go after 2 or 3 times as many
companies, it may have a bigger deterrent effect, via extra publicity.

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cwan
The problem with going after companies and not people is that it doesn't
necessarily act as a future deterrent since these people aren't the ones
paying for the penalties anyway - it's the companies. So there's that agency
problem that the interests of managers are different than that of shareholders
(the risks for the managers may be much lower than the potential reward).

Further, as in the case now of some of these prosecutions that are negotiated
against companies (as Spitzer arguably did with AIG), the appearance is also
that it amounts to extortion. The simple act of threatening to charge a
company making it more difficult to do business, may be enough to "settle" to
provide some prosecutor with publicity for a future gubernatorial run.

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HeyLaughingBoy
They do!

I used to work for a very small NASDAQ-traded company headed by a bunch of
scumbags. Actually, just _one_ scumbag: as far as I could tell the rest of
them only stuck around because they wanted their investment back. A few years
after I left, I found out that the company was being sued by the SEC, and
specific officers _and family members_ were ordered to disgorge illegally
retained profits. SEC even ordered that the accounting firm that produced the
annual/quarterly reports be prohibited from ever representing a public
corporation again!

I laughed my ass off for days!!!

It may be rare, but in extreme cases of fraud, they will investigate and
prosecute. I just wish I knew who among their pissed-off shareholders pulled
enough strings to make it happen.

