Wall Street Porn -- SEC Knows It When It Sees It

Regulators may be driven by good intentions, but their effort to stop the spread of disturbing information and opinions about public companies looks more like an assault on the right of anyone to express his views on a public entity. Public companies are like public figures. Thus, it's fair to say almost anything about them.

With respect to the laws of libel and slander, the only forbidden statements are those claiming that a public figure has committed a crime or had contracted a loathsome disease. However, if such a claim is true, then there is no penalty for publishing the truth. The truth is the best defense.

However, if anyone should face disciplinary action for shooting his mouth off, it's Senator Chuck Schumer, who singlehandedly caused a run on IndayMac Bank that brought about its collapse. Schumer, of course was too cowardly to admit his statements about the condition of IndyMac were responsible for the depositors' run on the bank. He blamed the bank's management for the problems -- a true but misleading statement -- while distancing himself from the reality that a senator who on sits on the Senate Banking Committee can issue statements that send bank depositors into a panic.

Securities Regulators to Examine Industry Controls Against Manipulation of Securities Prices Through Intentionally Spreading False Information
Prevention Effort Augments SEC's Ongoing Enforcement Investigations

Washington, D.C., July 13, 2008 — The Securities and Exchange Commission today announced that the SEC and other securities regulators will immediately conduct examinations aimed at the prevention of the intentional spread of false information intended to manipulate securities prices. The examinations will be conducted by the SEC's Office of Compliance Inspections and Examinations, as well as the Financial Industry Regulatory Authority and New York Stock Exchange Regulation, Inc.

The securities laws require that broker-dealers and investment advisers have supervisory and compliance controls to prevent violations of the securities laws, including market manipulation. Examiners will focus on these controls and whether they are reasonably designed to prevent the intentional creation or spreading of false information intended to affect securities prices, or other potentially manipulative conduct.

These examinations are in addition to the Commission's enforcement investigations into alleged intentional manipulation of securities prices through rumor-mongering and abusive short selling that are already underway.

"The examinations we are undertaking with FINRA and NYSE Regulation are aimed at ensuring that investors continue to get reliable, accurate information about public companies in the marketplace," said SEC Chairman Christopher Cox. "They will also provide an opportunity to double-check that broker-dealers and investment advisers have appropriate training for their employees and sturdy controls in place to prevent intentionally false information from harming investors."

FINRA, NYSE Regulation and the Options Regulatory Surveillance Authority recently reminded industry firms that intentionally spreading false rumors or engaging in collusive activity to affect the financial condition of an issuer are violative activities, and further reminded market participants to review their internal controls and procedures to prevent this type of conduct.