SEC Charges Billionaire Brothers With Fraud

The Securities Exchange Commission is charging Texas billionaires Sam and Charles Wyly for allegedly participating in insider trading to the tune of $550 million.

The complaint filed Wednesday by the Commission states, “Sam Wyly and Charles Wyly engaged in a 13 year fraudulent scheme to hold and trade tens of millions of securities of public companies while they were members of the boards of directors.”

The Dallas-based Wylys founded the software company Sterling Silver, which the SEC claims the brothers attempted to defraud along with Scottish Annuity and Life Holdings Ltd. and Michaels Stores, Inc.

Also ensnared in the charges are the brothers’ lawyer Michael C. French and stockbroker Louis J. Schaufele III.

Aside from their roles as entrepreneurs, the Wylys are known as major donors to Conservative causes. According to the watchdog site OpenSecrets.org, the brothers have provided GOP candidates and committees with more than $2 million over the last two decades.

The SEC’s complaint can be read here.

SEC Chair Expects Commission To "Hit The Ground Running"

By Sarah Mamula - Talk Radio News Service

With the signing of the Dodd-Frank reform bill last week, Securities and Exchange Commission (SEC) Chair Mary Schapiro said Tuesday that massive reforms on Wall Street will soon start to take affect. Schapiro said the commission will “hit the ground running” as it prepares to tackle close to 100 new regulatory rules.

Schapiro said that the commission plans to move forward by incorporating the input of the public and by ensuring transparency is established.

“The idea is to offer maximum opportunity for public comment and to provide greater transparency,” said Schapiro.

The SEC Chair said interested parties will be able to offer their ideas on financial regulatory laws through emails, comments and scheduled meetings with the SEC staff. 

“We are determined to do this right,” said Schapiro.

Schapiro said the SEC plans to work on provisions including broker-dealer standards, transparency of corporate financial information and ensuring hedge fund advisers are registered with the commission.  The SEC Chair said this would ultimately allow the commission to track the private funds these professionals advise. 

Schapiro also said the agency is “energized” and prepared to implement provisions of the new financial regulatory bill, but has also asked Congress for approximately 800 more staffers to take on the job.

“Our goal is a high quality regulatory regime in the United States,” said Schapiro. “We do expect that we can show leadership in a lot of these areas.”

Frank And Others Less Than Interested In Financial Regulatory Reform

By Joseph Russell- Talk Radio News Service

House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) seemed to be a bit distracted Wednesday during the committee's testimony on financial regulatory reforms proposed by the Obama administration.

Frank read a newspaper, fell asleep, and then left early during testimony from Chairman Mary Schapiro of the Securities and Exchange Commission (SEC) and Chairman Gary Gensler of the Commodity Futures Trading Commission (CFTC).

Frank’s lack of attention highlighted the disapproval shared by Republicans on the committee that the Obama administration’s proposals do not address the specific needs of financial regulatory reform, and vastly expand the SEC’s power.

“Perhaps an even more fundamental question needs to be asked here,” said Rep. Scott Garrett (R-NJ). “Will standardized business be significantly related to the recent meltdown of our financial markets? And if not, why are we prescribing cure for a non-existing ailment.”

The Obama administration has proposed a broad spectrum of reforms that would expand the U.S. financial regulatory system. The administration’s plan calls for derivatives and hedge funds to be regulated, a stiffening of securities and futures regulation, and regulation of the credit rating agencies by the SEC. This committee meeting was the first of several that will examine these proposals.

Regulation Proposed For Over-The-Counter Derivatives

The Chairmen of several U.S. financial regulatory agencies outlined a series of steps that can be taken to provide better oversight for Over-the-counter (OTC) derivatives dealers.

Appearing before the Senate Banking, Housing, and Urban Affairs Committee Monday, Gary Gensler, the Chairman of the Commodity Futures Trading Commission articulated the need to lower systemic risk, prevent fraud, and increase transparency in the OTC derivatives market.

“If we are not fully able to regulate the dealers, we will not give the American public the comfort they need,” explained Gensler.

The hearing comes shortly after President Barack Obama’s call for sweeping regulatory reform, which aims to establish a regulatory body to oversee the entire financial system, provide transparency for large private investment funds, and supervise agencies that offer credit-ratings.

When asked by Sen. Mike Johanns (R-Neb.) if the proper regulation would have prevented the failure of insurance giant American International Group (AIG), Gensler responded, “I think that a number of features here would have slowed down and maybe even have stopped [AIG’s collapse].”

Need To Close the Gaps In Resolution Regimes

By Kayleigh Harvey - Talk Radio News Service

“From the outset I have argued that our financial system is not merely in need of ‘reform,’ but of ‘modernization,’” said Senator Christopher Dodd (D-Conn.), Chairman of the Senate Banking, Housing and Urban Affairs Committee.

At the hearing, which discussed “Enhancing Investor Protection and the Regulation of Securities Markets,” Senator Dodd asked the Chairman of the SEC Mary Schapiro, “Were you consulted by the Treasury and the Fed? What role do you think the SEC should play in this resolution mechanism, given the oversight and regulatory responsibilities?”

Senator Dodd also asked Ms. Schapiro to “comment on the reports of the regulatory changes that Secretary Geithner has mentioned this morning.”

Ms. Schapiro responded, “generally there was consultation.”

Ms Schapiro added, “We clearly have gaps in our resolution regime for large financial institutions....I fully support the concept of closing the gap in resolution regime so that we have a more coherent approach.”

Senator Chuck Schumer (D-N.Y.) said, “We all believe people should be rewarded for good performance, that’s not the problem, but what we’ve seen in many instances that has enraged Americans is a heads-eye wind tail you lose system. In which executives are rewarded for flashing the pan short term gains, or even worse, rewarded richly when the company does poorly and the shareholders have been hammered.”