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SEC Cracks Down On 'Street' Crime
Fair warning to all financial finaglers and sundry capital markets crooks.
The Division of Enforcement has been split into five units to better cover the increasingly complex financial services realm: asset management; market abuse; structured and new products; foreign corrupt practices; and municipal securities and public pension plans. The SEC has also formed a new risk analysis unit, the Office of Market Intelligence, to monitor tips and complaints connected to risky practices. We will aggressively pursue violations by advisers, including hedge funds, vows Bruce Karpati, 40, who co-heads the asset management task force and previously oversaw the agencys hedge fund working group.
Although the regulator acknowledges that the SEC needs new blood and new tools to pursue todays sophisticated rule breakers, he says it is responding vigorously to the challenge. Under chief Mary Schapiro, the SEC is seeking a 12 percent budget increase from this years $1.26 billion.
And the agency is one of the few Wall Streetrelated organizations that is on a hiring spree. Karpatis unit is looking for staffers with experience digging into hedge funds, trading and technology. Were going to be better able to identify market practices and issues that are harmful to investors, he says. And were not going to stop being aggressive.
The SECs get-tough stance is already being felt. Jack Yoskowitz, an attorney at Seward & Kissel in New York, says he has seen an increase in enforcement activities aimed at asset management firms. The SEC has stepped up enforcement and is going to make sure they dont become irrelevant, notes Yoskowitz. Still, a cynic might describe the SECs newfound enforcement zeal as an instance of shutting the barn door too late, but with a flourish. The SEC has done an awful lot of soul-searching, says Barry Barbash, a former head of the SECs Division of Investment Management and now a partner at Willkie Farr & Gallagher in Washington. From 30 years of experience six with the SEC Ive never seen anything like it.