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The SEC Is Back, And This Time They're Serious

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The SEC, fresh off an impressively long stretch of missing virtually everything they were supposed to catch, is ramping up its efforts to become a remotely credible regulator. After being publicly humiliated by the widespread ineptitude of missing the Madoff fraud as well as its own insider trading scandal, the new SEC Chairman, Mary Schapiro, is determined to create a new kind of SEC.

I wanted to be very clear almost from my first day -- not just with words, which are pretty easy to string together, but with actions -- that this is a new SEC that is moving in a decidedly different direction and at a decidedly different pace,

Given the rhetoric coming out of Washington regarding evil speculators, it should come as no surprise that hedge funds, derivatives, and short-selling are three of the primary targets in the SEC's cross hairs. Schapiro clearly has a huge uphill battle ahead of her. She is head of an organization where people still take issue with categorizing the Madoff miss as a failure. Effective regulation can help markets avoid the meltdowns we saw last year, but the risk of the SEC becoming over zealous to restore its image looms large.
SEC Chief Strives To Rebuild Regulator [Washington Post]



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SEC Burns Whistleblower In The Most SEC Way Possible

In recent years, the Securities and Exchange Commission has had its share a fuck-ups come to light. The regulator took a pass on heeding the warning signals by Bernie Madoff himself that he was running a Ponzi scheme, it chose to go after David Einhorn rather than Allied Capital when the hedge fund manager suggested all was not right at the company, and yesterday, it was announced that the Commission is suing Egan-Jones for lying about having rated 150 ABS bonds on an SEC application four years ago (in reality it had rated zero), information that could have been fact-checked at the time but was not because there were new clips on,, and to watch. Today the team scored a new victory when it outed an informant. Federal securities regulators, in a sensitive breach, inadvertently revealed the identity of a whistleblower during a probe of a firm that ran a stock trading platform. The gaffe by the Securities and Exchange Commission occurred during an investigation of Pipeline Trading Systems LLC when an SEC lawyer showed an executive who was being questioned a notebook from the whistleblower filled with jottings about trades, calls and meetings. The executive says he recognized the handwriting. Pipeline, which didn't admit or deny the allegations, was the subject of a page-one Wall Street Journal article earlier this month. The article didn't name the whistleblower, but he has now agreed to be publicly identified. He is Peter C. Earle, 41, a former employee of a Pipeline trading affiliate. Mr. Earle said he was "disappointed" the SEC took steps in its probe that ended up disclosing his identity to Pipeline. The SEC confirmed showing the notebook to an executive of the business it was investigating. SEC officials said there is always a risk a whistleblower's identity might be disclosed during an investigation, but its practice has been to avoid unnecessarily revealing an informant's identity. The person shown the notebook (in a November 2010 SEC interview), Gordon Henderson, was the head of Pipeline's trading affiliate, Milstream Strategy Group. He said in an interview that he previously suspected Mr. Earle was an SEC informant. Mr. Henderson's desk was near Mr. Earle's in Milstream's New York office, and he said he recognized Mr. Earle's handwriting in the notebook. Related: "Mr. Earle said he made other internal complaints about trading, and was fired on April 3, 2009. Mr. Henderson said the reasons for dismissal included poor performance and a belief Mr. Earle was having an affair with the wife of another Milstream trader at the time. Mr. Earle denied both allegations, calling the notion of poor performance 'ridiculous.'" Source's Cover Blown By SEC [SEC]