I have been peripherally involved with the SEC Special Advisory Committee on Smaller Public Companies.  The reason I got involved is because I became outraged while watching my SME clients struggle with SOX compliance requirements appropriate for a Fortune 500 company.  Of course, the outcome remains less than what was hoped. 

The SEC is made up of recent law school graduates and accountants.  These people do not understand the workings or the culture of Wall St. and are too often impressed by the marble floors and fine art, which we all know have nothing to do with the quality of the firm.  How many times in the past have we seen representatives of the SEC become bamboozled by the likes of Ivan Boesky, Michael Milken, and now, Bernie Madoff?  They are also bamboozled by complex financial products that any experienced denizen of Wall St can tell you won’t work. 

On the other hand, they torture entrepreneurs who are struggling to build a business and create value for their shareholders.

There is clearly a need to split the SEC into specialized groups with experienced people directing the efforts.  There needs to be a separate group of investigators who know enough to pull out a copy of the Wall St Journal to check to see if the prices Bernie Madoff claimed on his transaction tickets were actually the prices traded that day.  There needs to be a separate group of investigators who understand that when everyone is hedging, hedges don’t work.  There needs to be a separate group of investigators who understand that while Enron can set up thousands of distant subsidiaries in which to hide their secrets, a struggling entrepreneur can barely maintain a 3-room headquarters office.

Some common sense and experience must be applied.

The people who operate the SEC do not love our financial system.  Being small people, they love sitting in big chairs.   I love our financial system.  I love the memory of watching two equity block traders getting all mushy and misty eyed at Harry’s, talking about how wonderful it is to be able to trade hundreds of millions of dollars on one’s word of honor alone.  I love the memory of sitting at my place on the trading desk, hardly daring to breathe while watching the door to the corner office where important leaders from the top Wall St firms were meeting to figure out what to do to avoid a global crash in the wake of a major bank failure.  I love the memory of helping my clients immunize their pension fund portfolios.  I love the memory of everyone working together to create excellence.  There is much to be said about the sterling high minded qualities of Wall St, but there is also much to be said about the crooks.  Those of us who love our financial system have always been able to spot most of the crooks.  Unfortunately, those who hate our financial system miss the crooks every time because they are too busy trying to figure out why people on Wall St will work 12 to 18 hours a day under high pressure conditions and extremely high goals.  They can’t understand why people will do this, because they don’t understand what it really is to love what you do.  

Like so many shallow and inexperienced people, they are infatuated with the sex and distrust the love.