Yet another blow has been dealt against any quaint notions of fair play or honesty in the markets.
What do I mean?
Well, today the SEC announced that it has dropped its investigation into Gradient Analytics, the research firm accused by a number of companies (most of which are still on the Reg SHO list, for years) of participating in a scheme to damage companies targeted by a cabal of short sellers.
This shut-down of the "investigation" should surprise no one.
Why? Well, this is the same SEC accused by the Senate Judiciary's two most aggressive members of either being grossly incompetent, or participating in a cover-up, and obstructing justice. Not years ago, but weeks ago, in oral statements, and in a preliminary report that would have been impeachment material only recently. This, after the Judiciary Committee's research into the SEC's unbelievable handling of the Pequot insider trading "investigation" and subsequent elimination of the lead investigator, and ensuing cover-up, painted a picture of an agency dangerously out of control.
This would be the same SEC which chose in its wisdom not to take the testimony of the critical witness in that case until after the statute of limitations had run out. Which decided to fire its chief investigator in that case rather than allow him to investigate a Wall Street icon. Which predictably found no evidence of insider trading in a case with 18 separate referrals from SROs indicating unmistakably suspicious activity. The SEC which apparently was able to ignore Senator Specter's hearing on insider trading and its insidious and pervasive impact on our public markets (which received ZERO coverage by the NY financial press...) - that darned SEC just can't figure out who is doing all that insider trading, but God help you if you are an investigator staring at the only guy wearing a bull's-eye...
So why would it surprise anyone that the same SEC that issued subpoenas to journalists allegedly involved in the manipulation scheme would drop its investigation? And why would it surprise anyone that the same media personalities named in the subpoenas would be trumpeting the SEC walking off the field?
That would be the same SEC that quashed the subpoenas moments after they were issued, and basically refused to gather the evidence that would implicate or clear the journalists. That took days of eyewitness testimony and apparently decided that the allegations of systematic, collusive, and pre-meditated manipulation didn't merit serious consideration.
The same SEC that fired Aguirre when he took steps to box in the person he placed as the likely insider trader - effectively removing the only impartial investigator in the Pequot case, which was then whitewashed and dropped in the same manner as the Gradient case. The same SEC whose San Francisco head of investigations, who cleared and issued the subpoenas to the journalists in the Gradient case, suddenly received a dream job offer for huge money and indeterminate duties (mere days after issuing the subpoenas), out of the blue, from an investigation firm implicated as connected to the miscreants - effectively removing the driving force in the Gradient investigation.
The same SEC who, when "investigating" the Aguirre firing matter, examined exactly none of the evidence collected by the man, and took no testimony from anyone but those involved in firing him, and which was then publicly humiliated and chastised when its own personnel contradicted its official position that there was no there there in Aguirre's charges of cover-up.
We know all these things. They are all verifiable. The same reporters who were subpoenaed studiously avoided reporting ANY of it, but we know about it due to coverage of the hearings, and a few non-NY reporters.
Cramer wiped his bottom with his subpoena. He understood at the time that it was a farce, and that big Wall Street interests would remove the irritation of the SEC bothering Wall Street's chosen few. Few of us watched that display and didn't understand the implications. One would have to be blind not to.
So, what do you do when your cops are proved absolutely corrupt, and in the pocket of the miscreants they are chartered with policing?
Well, I suppose if you are a complicit financial journalist, you NEVER report any of the stories wherein the SEC is shown to be corrupt, or the naked shorting problem is shown to be a deci, if not centi, billion dollar problem, and instead, hear no evil and see no evil - remember, your readers are idiots, and they will only remember whatever you state is the truth of the day.
That is a good start. A safe position. Just pretend not to know anything that threatens your position that all is well, and act only guided by your own self-interest.
If you are an SEC official, you continue to twist the truth, mislead Congress, and do your best work to run interference for Wall Street.
If you are a miscreant, you smile as folks rail at the gross injustice of companies on the SHO list for over two years, or massive and obvious ongoing manipulation, and you just keep on looting the financial system. After all, nobody said life was fair. Somebody has to steal everything that isn't bolted down. If not you, someone else.
As an aside, the miscreants always believe they are the smartest guys in the room, from what I can tell, which ignores that if you are a criminal, engaging in criminal behavior, whose edge consists of buying the authorities and robbing investors blind, you don't have to be very smart at all. Not even very subtle. You just have to own the cops, and be able to keep suckering in new rubes to rob - which the average Times Square 3-card Monty huckster can do nicely. It really doesn't require intellect as much as it does connections and a larcenous streak as wide as the Hudson.
So what does one do now? Well, clearly expecting the SEC to do anything that runs counter to the interests of the miscreants is silly. I would argue for decades they have been nothing more than a private police force for the Wall Street mob. When Milken was eating entrenched Wall Street's lunch, a series of blind tips mysteriously came about, and, gasp, imagine, he was involved in stock parking, insider trading, etc. etc. etc. A suddenly galvanized and motivated NY DA, and SEC staff chomping at the bit, sprang into action. Things that everyone knew were ubiquitous practice on Wall Street, just as insider trading and bear raids are understood to be ubiquitous today, suddenly became a big focus. And yet the only guy they could nail was the one taking the big IB money away from the entrenched power houses.
How convenient for Wall Street, and inconvenient for the new upstart. Was he a bad man doing bad things? Sure. Any worse than any of his peers? Arguably not. Arguably just part of the status quo. Same miscreants ruining the markets today, but much more monolithically, and thus far less chance of a rogue upstart coming in and taking one's established book of business. Much tidier for everyone.
When we see any enforcement actions these days, it is always fringe players. We never see the obvious investigated. We never see the SEC ask, "Why has this handful of companies, all targeted by the same cartel of miscreants, all the beneficiaries of "research reports" by the same "research groups", all negatively mentioned by the same dozen reporters, all been on the SHO list of companies with a large naked shorting problem, EVER SINCE THE GD LIST CAME OUT?"
Nope. Tut tut. None of that.
If only there was a sign....
No, instead we have investigators removed by hook or crook, evidence ignored, and even in the face of Congressional accusations of colossal and endemic corruption, business as usual at the SEC.
Why not? It pays great. Nobody ever does anything to stop it. The rubes keep lining up to hand over their money.
It's a great gig, just as being in charge of the black market in most of the rest of the world is a great gig. One owns the authorities, makes a fortune at the expense of any productive members of society, endangers whole systems of creativity and enlightenment in exchange for immediate illicit gratification, and does so with impunity, fearing only opposing warlords, or competitors with more "juice."
Sound familiar?