Friday, April 12, 2013

Rakoff and the SEC

The Economist has a short interesting article looking at what has happened since federal judge Jed Rakoff, back in 2011, rejected a $285m settlement between the SEC and Citicorp. Rakoff was rightly irked that the SEC and Citicorp had reached a typical business-as-usual ruling where the alleged offender pays a fine (part of the cost of business) yet admits no wrong doing. How, Rakoff asked, does this serve the public interest, especially in deterring further crimes?

That ruling is still in some sort of appeal process, but as the article points out, several other judges have since taken inspiration from Rakoff's action and have rejected similar cozy arrangements between the SEC and various alleged offenders. On the ongoing saga of the Rakoff ruling, it seems that a final appeal decision may come out within a month or so, and many parties have taken an interest. As the article notes,
No less than four amicus briefs (filings by someone not party to the case) have been received—and not just from the usual suspects. The authors were the Business Round Table (an organisation of chief executives); a coalition of 19 prominent law professors; the former head of the SEC, Harvey Pitt; and the Occupy Wall Street Movement. All the submissions ask searching questions about the agency’s performance in light of the financial crisis. It will be [new SEC head Mary Jo] White’s job to restore confidence in the SEC. The courts seem increasingly prepared to make that task harder.
It's only that last bit that I think the article has completely wrong. If it is the job of Mary Jo White to restore confidence in the SEC, then Rakoff and the other judges are actually showing her the way. If anything, they are making it easier. But I'm not convinced this is really the primary purpose of her job....

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