SEC Chairman defends his pathetic record originally appeared on BloggingStocks on Fri, 26 Dec 2008 09:00:00 EST. Please see our terms for use of feeds.

With SEC Chairman Chris Cox using his light saber to battle the imaginary sith lord of naked short selling, SEC Inspector General David Kotz has released a fourth report criticizing the commission for its oversight of Wall Street over the past two years.

According to The Wall Street Journal (subscription required), Kotz found that the SEC's Miami office dropped a case against Bear Stearns "and others despite negotiating a $500,000 settlement with the investment bank for failing to supervise a former employee. The case, which was described as 'strong' by at least three enforcement staffers, was dropped without being presented to the five-member commission for a vote."

The head of the Miami office, David Nelson, told Bear Stearns lawyers that "Christmas is coming early" this year, and "Bear Stearns can keep their money." The case involved an employee who was alleged to have given inappropriately high valuations to bonds and loans held by a Puerto Rican bank.

The SEC's enforcement staff responded to the report by saying that it is "misleading, and all too often relies on speculation and innuendo to support its harsh conclusions."

Harsh conclusions? You mean like the collapse of the financial sector and a $700 billion taxpayer funded bailout?

It's unclear whether a $500,000 settlement would have changed anything, but the announcement might have tipped off investors to the huge problems at Bear Stearns before it was too late.

SEC inspector says agency messed up on Bear Stearns regulation originally appeared on BloggingStocks on Sat, 11 Oct 2008 17:10:00 EST. Please see our terms for use of feeds.

SEC Chairman shatters naked-shortselling conspiracy theories originally appeared on BloggingStocks on Wed, 20 Aug 2008 11:00:00 EST. Please see our terms for use of feeds.

SEC wants more funding originally appeared on BloggingStocks on Mon, 21 Apr 2008 17:14:00 EST. Please see our terms for use of feeds.

In honor of the tenth anniversary of blogging, The Wall Street Journal interview a handful of noteworthy minds on the impact of blogging on society. For investors, the most interesting comments came from SEC Chairman Chris Cox:

As investors strive to make sense of the ever-higher mountains of data that we're buried under, the services of bloggers, whom we can imagine sitting at home in their pajamas trolling the Internet for us, free of charge, are likely to be an increasingly consequential addition to the investor's tool kit...

Do bloggers portend more lasting ramifications for the securities world? But of course. Shareholders are on the move, and technology has given them a cheaper and more-effective means to communicate. From improved price discovery to better corporate governance, investors, markets, managements and boards will never be the same.

It's encouraging to see that Chairman of the SEC recognizes the positive impact that blogs can have on financial markets, and all of us at BloggingStocks are thrilled to be "sitting at home in pajamas trolling the internet for you, free of charge."

His comment that bloggers can lead to "better corporate governance" is particularly interesting. Bloggers have the space to rant about executives in a way that few print publications to do. In the past, I've used BloggingStocks to try my hand at shareholder activism involving a company I own shares of, and I plan on doing more of that in the not too distant future.

Bloggers like Gary Weiss have used the internet to expose fraud and corporate shenanigans.

There's no question that blogging has already made a big impact on the investment world and, as it gains acceptance (The SEC chairman endorsing blogging!), I would look for that influence to increase.

SEC Chairman is a fan of blogs! originally appeared on BloggingStocks on Mon, 16 Jul 2007 10:15:00 EST. Please see our terms for use of feeds.

SEC Chairman Chris Cox called on the mutual fund industry to join him in the "war on complexity." Cox discussed the difficulties that investors have in comparing mutual funds using the SEC's Edgar Database. He also called for more disclosures about 401(k) fees and performance, saying that "We will continue to purge all the legalese and convert it to plain English. But getting rid of the gobbledygook is no easy task. But we want to give every investor the info to achieve sound investment decisions."

I'm highly skeptical about the odds of mutual funds making it easier for investors to compare expenses and performance because, if they did, most people wouldn't buy most mutual funds. If people had a solid understanding of mutual funds and the factors impacting their performance, pretty much everyone would buy the lowest cost index fund they could find. Needless to say, that wouldn't be good news for most investment management companies.

However, instead of complex disclosures and spreadsheets that 99% of individual investors really don't care about, I have a plan. Every mailing/advertisement/prospectus discussing a mutual fund should be required to contain a red piece of paper with the following:

DEAR INVESTOR:

Most likely, the mutual fund that is soliciting your business brags about its track record and its management team's expertise. As an investor, there's something you need to know: None of that matters.

Past performance, Ivy League credentials, and colorful promotional literature have very little impact on a fund's future performance. Here's what matters: The expense ratio. By keeping your costs as low as possible, you will beat more than 80% of actively managed funds.

Investment legends including Warren Buffett, John Bogle, and Burton Malkiel (to say nothing of Ben Stein and Suze Orman) have all said that most investors should stick with passively managed, low-cost index mutual funds. If the fund being advertised here does not fit that description, we strongly advise you to toss the mailing into your recycling bin.

Best of luck in your pursuit of wealth.

Your Friends at the Securities and Exchange Commission

SEC wants to make mutual funds easier to understand originally appeared on BloggingStocks on Fri, 11 May 2007 17:30:00 EST. Please see our terms for use of feeds.