Published July 12, 2013
Has the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 really succeeded? How much has really changed over the past three years?
Here's a short checklist of what it's done so far:
1) It still hasn't outlawed banks (KBE) that are too big to fail.
2) We still have loopholes in insider trading laws for members of Congress (via political intelligence and consulting bribes).
3) We still have national stock exchanges (NYX) sharing information with high frequency traders (HFT) and anyone that will pay them a data fee. It's called legalized front running.
4) It still hasn't stopped new and even more liberal rules from being passed. For example, hedge funds will now be permitted to market their themselves to Main Street investors. It can't be long before we see advertisements for convertible arbitrage funds in Bon Apptit and People Magazine! Here's another example of lax regulation: The SEC is now clearing the way for the promotion of unregistered stock offerings.
5) The top brass at the SEC and other financial regulatory bodies are so closely tied to Wall Street and the institutions they regulate, their personal biases and business alliances consistently conflict with their responsibility to protect the public. As a result, regulators are rendered impotent.
The ongoing public debate about the broker/advisor fiduciary standard is further proof that Dodd-Frankenstein is still a) too confusing and burdensome to be implemented, b) can't be implemented, or c) all of the above.
In my book "Gents with No Cents: A Closer Look at Wall Street, its Customers, the Media, and Financial Regulators" (HalfFull Publishing Group, 2011) I wrote:
"I know there's a growing populace that would like to abolish the SEC and they have a point. No existence is better than an ineffective existence - isn't it? I liken the SEC's existence to the feathers on an ostrich. Do an ostrich's feathers help it to fly better? Not really, but liken the SEC, the feathers are there for decoration. Can you imagine what an already ugly beast would look like without feathers?For the public good, I would like to see the SEC simplify its charter and aim for more achievable milestones. How about this one: We won't make things worse."
The enforcement of existing securities rules is a tough nut that Dodd- Frankenstein still hasn't cracked. And the financial services industry is still over-regulated and under-policed.
In the meantime, the best advice I can give people is to get some basic financial education and be defensive with your assets so you don't get scalped. And one more important thing: Stop relying on securities regulators to protect you from financial crackpots.
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