Phil Cannella has made it his life’s work to investigate flaws within the systems that impact the lives of the everyday consumer.
You’ve probably heard me talk about the revolving door before. That’s when employees of the Securities and Exchange Commission (SEC) leave their jobs to take new ones in the private sector financial industry. It seems fine until you realize that the SEC is supposed to be regulating that very industry, and yet its employees routinely drop out and take up (usually higher-paying) jobs in the financial industry, and vice-versa. This put these employees in a position where they can tell their new bosses how to navigate around the very laws they were supposed to be enforcing when they worked at the SEC. Even worse, employees from the financial industry come to the SEC and are sometimes put in a position where they are regulating their former employers.
The revolving door is one of the biggest problems when it comes to regulating the financial industry. It leads to a system of “you scratch my back, I’ll scratch yours” in Washington and on Wall Street.
When I interviewed former SEC Inspector General H. David Kotz, he even admitted that the SEC’s revolving door problem was a concern, and stated that the SEC needed to put rules in place to stop it from happening (click here to see a clip from that interview). Kotz went on to state that the answer to solving the problem was the institution of stricter rules that would prevent former employees from lobbying the SEC in their new roles in the private sector (click here to see that clip).
Well since H. David Kotz left the Office of Inspector General early in 2012, you may be wondering if the revolving door situation has improved. A new report by the Project on Government Oversight (POGO) shows that former SEC employees are still up to their old tricks, regularly testifying before the SEC on regulatory matters on behalf of their new employers.
Through its investigation, POGO found numerous instances of financial firms being granted special legal favors in cases that were being handled by former SEC employees. From the POGO report:
POGO examined all of these exemptions on the SEC website issued under the Investment Company Act in 2011 and 2012. Of the 158 issued during those two years, 58 of them were requested by legal teams that included SEC alumni.
This shows that in many of the cases where companies were granted special exemptions from federal securities laws by the SEC, former SEC employees were the ones lobbying on behalf of the financial industry. This creates huge potential for corruption, and it ensures that average investors and people in or near retirement are not getting a fair shake. The laws and regulations set up to regulate the financial industry are there to protect consumers, and yet firms are allowed to skirt those laws, in some cases directly harming investors, all because former SEC employees are helping their new bosses secure special favors.
This report is hot off the presses and is filled with great data about the SEC’s revolving door. If you’re an investor, and especially if you are in or near retirement, you need to read this report. Staying educated is the only way to get a leg up on the schemes and scams of Wall Street, and reading this report is a good first step towards gaining that knowledge.
And you can rest assured I will be reviewing the report, which contains tons of great data. As I uncover more injustices, I will be reporting back to you, so make sure to check back in with my blog for more posts.
Phil Cannella is the founder and CEO of Retirement Media, Inc.
To view more of Phil Cannella’s interviews, click here.