SEC Commissioner Appalled By Latest Wall Street Criminal Acts


SEC Commissioner Appalled By Latest Wall Street Criminal Acts

While the bandits of Wall Street sidestepped yet another criminal prosecution and yet again got off without anyone going to jail yesterday, one member of the Securities and Exchange Commission has, like us, had enough.

Yesterday the SEC announced that the large banks had agreed to a settlement, record fines (for the third time this year) and promises of not to do it again in response to a wide ranging criminal conspiracy to rig foreign exchange markets.

The banks colluded to fix the prices honest, hard working business people pay to exchange one currency for another, in order to enrich themselves and pay large bonuses for stealing from hard working Americans.

Commissioner Kara M. Stein dissented from yesterday's sweep-it-under-the-rug settlement with the large criminal banks, instead arguing that the banks are, in fact, large criminal organizations with a long track record criminal conduct and are all repeat offenders.

Ms. Stein, who should consider running for office, went on to detail just how and when the big banks have engaged in criminal behavior and illustrated just how little punishment they have received for their actions.

Below is her dissenting opinion, which should be read in full to understand just how corrupt and criminal Wall Street has become.

Commissioner Kara M. Stein

May 21, 2015

I dissent from the Commission’s Orders, issued on May 20, 2015, that granted the following waivers from an array of disqualifications required by federal securities regulations:

UBS AG, Barclays Plc, Citigroup Inc., JPMorgan Chase & Co. (“JPMC”), and the Royal Bank of Scotland Group Plc (“RBSG”), waivers from the provisions under Commission rules that automatically make them ineligible for well-known seasoned issuer (“WKSI”) status;

UBS AG, Barclays, and JPMC waivers from automatic disqualification provisions related to the safe harbor for forward-looking statements under Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934; and

UBS AG and three Barclays entities waivers from the automatic Bad Actor disqualification provided under Rule 506.

The disqualifications were triggered for generally the same behavior: a criminal conspiracy to manipulate exchange rates in the foreign currency exchange spot market (“FX Spot Market”), a global market for buying and selling currencies. Traders at these firms “entered into and engaged in a combination and conspiracy to fix, stabilize, maintain, increase or decrease the price of, and rig bids and offers for,” the euro-dollar foreign currency exchange (“FX”). To carry out their scheme, the conspirators communicated and coordinated trading almost daily in an exclusive online chat room that the traders referred to as “The Cartel” or “The Mafia.” Additionally, salespeople and traders lied to customers in order to collect undisclosed markups in certain transactions. This criminal behavior went on for years, unchecked and undeterred.

There are compelling reasons to reject these requests to waive the automatic disqualifications required by statute or rule. Chief among them, however, is the recidivism of these institutions. For example, in the face of the FX criminal action, a majority of the Commission has determined to grant Citigroup yet another WKSI waiver, its fourth since 2006. It is worth noting that Citigroup was automatically disqualified from WKSI status between 2010 and 2013 for unrelated misconduct, meaning that it has effectively now triggered WKSI disqualifications five times in roughly nine years. Further, through this latest round of Orders, the Commission has granted:

Barclays its third WKSI waiver since 2007;

UBS its seventh WKSI waiver since 2008;

JPMC its sixth WKSI waiver since 2008; and

RBSG its third WKSI waiver since 2013.

The Commission has thus granted at least 23 WKSI waivers to these five institutions in the past nine years. The number climbs higher if you include Bad Actor and other waivers.

This latest round of criminal charges also comes on the heels of the Department of Justice’s actions against UBS, Barclays, and RBSG for their collusive manipulation of the London Interbank Offered Rate (“LIBOR”), a benchmark used in financial products and transactions around the world. The manipulation of LIBOR was flagrant and “impact[ed] financial products the world over, and erode[d] the integrity of the financial markets.” As part of the settlements in the LIBOR matters, UBS, Barclays, and RBSG each entered into agreements with the Department of Justice in which they undertook not to commit additional crimes during the term of the agreements.

Allowing these institutions to continue business as usual, after multiple and serious regulatory and criminal violations, poses risks to investors and the American public that are being ignored. It is not sufficient to look at each waiver request in a vacuum.

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