BU Now » Securities and Exchange Commission

Dell settling Intel claims

Dick Taffe — Fri, 11 Jun 2010 21:03:14 +0000

Dell is in settlement talks with the Securities and Exchange Commission to resolve allegations that its founder/CEO Michael Dell engaged in financial irregularities related to Dell’s dealings with chip-maker Intel — with no admission of guilt or bar of Dell from service as an officer or a public company. Visiting law Professor Elizabeth Nowicki, a former SEC and Wall Street attorney, says it indicates the SEC is focused on bigger issues and might be willing to defer in the Dell matter to a similar lawsuit filed by New York’s attorney general.

“The SEC can only vigorously fight so many battles at a given time.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu

Congress eyes credit-rating agencies

Dick Taffe — Wed, 02 Jun 2010 21:00:54 +0000

The Congressionally sponsored bipartisan Financial Crisis Inquiry Commission now has cast its eyes on the credit-rating agencies and the impact they may have had on the Great Crash of 2008. Law Professor Elizabeth Nowicki, a veteran attorney from both Wall Street and the Securities and Exchange Commission, says the agencies are both hopelessly plagued by conflicts and in a position to undermine the very stability of the capital markets.

Nowicki: “Today’s hearings, then, will serve only as a political tool to emphasize the need for a dramatic response to the financial crisis.”

Meantime, School of Management master lecturer Mark Williams, a former Federal Reserve Bank examiner and author of “Uncontrolled Risk” about the fall of Lehman Brothers, says that while the rating agencies weren’t the main cause of the credit crisis, but they left the gate open and let the market and its participants behave in a more destructive manner.

Williams: “Meaningful financial reform will require that rating firms devise compensation plans that reward for high rating standards and provide penalties for intentional ratings manipulation.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu; or Mark Williams, 617-358-2789, williams@bu.edu

SEC moves to avoid “flash crash”

Dick Taffe — Wed, 26 May 2010 20:30:17 +0000

In an effort to avoid a repeat of the May 6th “flash crash” when computerized trading markets tumbled out of control, the Securities and Exchange Commission has voted unanimously to require audit trails to cover all trading orders from start to finish. Visiting Law Professor Elizabeth Nowicki, a former SEC and Wall Street attorney, says the proposal to allow the SEC constant, real-time access to that information to better monitor the markets is a great idea in support of investor protection — but it won’t fix everything.

“The reality is that this sort of information aggregation system is not a panacea, and, given how fast and sophisticated today’s trading markets are, it is unrealistic to expect that the SEC can ever truly be a real-time market regulator. Investors simply cannot expect that of the SEC.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu

Morgan Stanley new Fed target

Dick Taffe — Wed, 12 May 2010 21:16:18 +0000

Wall Street investment bank Morgan Stanley reportedly is being investigated by federal authorities to see if it misled investors about mortage-derivatives deals it helped design and sometimes bet against. This is on the heels of the Securities and Exchange Commission charging Goldman Sachs with securities fraud involving similar collateralized debt obligations or CDOs. Law Professor Elizabeth Nowicki, a former SEC attorney and Wall Street lawyer, says this suggests Morgan Stanley might end up in the same position as Goldman is in.

“The federal government is now making clear that they will take the aggressive watchdog actions they have recently been chastised for not taking over the past two years. The bigger question is what other banks can expect a phone call from the SEC or the DoJ.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu

SEC probes stock-market plunge

Dick Taffe — Mon, 10 May 2010 16:49:19 +0000

Heads of the major stock exchanges were summoned to Washington by federal regulators to try to help figure out what caused last week’s computerized sell-off the shot the Dow Jones Industrial Average down 1,000 points in a matter of minutes. Law Professor Elizabeth Nowicki, a former Securities and Exchange Commission attorney and Wall Street lawyer, said the incident was similar to the ‘Black Monday’ crash in 1987, which the markets survived.

“The vehement suggestion that the SEC should adopt forthwith market circuit breakers for all markets is premature, given that liquidity is needed to some degree to help markets self-correct, even if short-term volatility is unnerving.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu

Goldman faces criminal probe

Dick Taffe — Fri, 30 Apr 2010 20:31:38 +0000

Beleagured Wall Street giant Goldman Sachs, already sued by the SEC on securites-fraud civil charges, reportedly is now being investigated by the Department of Justice for possible criminal charges. Law Professor Elizabeth Nowicki, both a former SEC attorney and Wall Street lawyer, called the revelations stunning.

“This is not a usual occurrence at all, and it is far more serious, in my view, than the SEC’s securities fraud lawsuit.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu

SEC charges Goldman with fraud

Dick Taffe — Fri, 16 Apr 2010 18:59:43 +0000

The SEC alleges Goldman Sachs defrauded investors by marketing an investment backed by sub-prime loans without telling them that a big hedge fund was on the other side betting that it would fail — which it did. Law Professors Cornelius Hurley, a former counsel to the Fed Board of Governors, and Elizabeth Nowicki, a former SEC attorney, say the case is stunning.

Hurley: ”Beyond the Goldman vice president charged in the complaint, how endemic to Goldman were these practices? Beyond Goldman, how endemic to this opaque industry, were these egregious practices?”

Nowicki: ”Goldman had the obligation to be candid with the market. This is the antithesis of honorable conduct. No wonder most of Main Street is disgusted with most of Wall Street.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu

Protecting asset-backed securities

Dick Taffe — Thu, 08 Apr 2010 20:22:01 +0000

New rules proposed by the S.E.C. would, among other things, require that the issuers of bonds filled with bundled mortgages — not the ratings agencies — would have to vouch for their soundness and retain 5 percent of each bond. Law Professor Tamar Frankel, an authority on securities law and author of “Trust and Honesty: American’s Business Culture at a Crossroad,” says the proposals are reasonable.

“The rating agencies that were supposed to be the judges of risk failed, and it matters not why they did. The results were too painful for millions of people and too lucrative for the relative few. That is why the S.E.C.’s proposal is so timely and so important.”

Contact Tamar Frankel, 617-353-3773, tfrankel@bu.edu

SEC trys to bolster enforcement image

Dick Taffe — Tue, 06 Apr 2010 22:14:12 +0000

For the past year the Securities and Exchange Commission has been trying to toughen up its weakened image. But it still faces skepticism about its ability to adequately enforce laws against corporate crime. Law Professor Tamar Frankel, an authority on securities law and author of “Trust and Honesty: America’s Business Culture at a Crossroad,” says it will take time.

“What brought us to this stage in years cannot be changed in one. The SEC should examine possible culprits, cooperate with local prosecutors, and establish a leadership aimed at restoring America’s trust in its institutions. And that takes time.”

Contact Tamar Frankel, 617-353-3773, tfrankel@bu.edu

SEC revamping enforcement arm

Dick Taffe — Thu, 14 Jan 2010 22:37:21 +0000

The Securities and Exchange Commission is upgrading itself, creating specialized units within its enforcement arm and offering financial-insider informants immunity from prosecution. Law Professor Elizabeth Nowicki, a veteran of both the SEC and Wall Street, says the immunity for witnesses can help insure investors that the market is still relative safe.

“Offering immunity to a securities fraud participant in exchange for testimony is a small price to pay for the ability to bring down major fraud schemes that would otherwise be hard to prove.”

Contact Elizabeth Nowicki, 617-353-2807, enowicki@bu.edu