Embedded Regulators Increase Wall Street Enforcement Efforts

William S. Burroughs famously said “Sometimes paranoia’s just having all the facts.”

And the fact of the matter is in today’s regulatory environment you might be surrounded by regulators in the elevator, as the Wall Street Journal so aptly put it. Our New York Securities Lawyers understand the added pressure faced by many banks and investment companies in the wake of the economic collapse. In true government fashion, the increased scrutiny does not necessarily mean increased training or increased resources. Instead, it’s just as likely to mean “rush to judgment.” As an employee, it’s more important than ever to keep proper documentation, to avoid shortcuts, and to not give in to pressure.
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For investors weary of the seemingly weekly stories about Ponzi schemes and cases of securities fraud in New York and elsewhere, increased regulatory enforcement is a step in the right direction. However, possible conflict-of-interests continue to exist, as evidenced by the often cozy relationship between regulators and their charges. Restrictions are needed to prevent investigators from taking high-paying jobs from the very people they have been charged with regulating.

The Journal reports the Federal Reserve Bank of New York and the Office of the Comptroller of the Currency are increasing the number of examiners who go to work every day for the companies they regulate. Such regulators embed themselves at companies like Bank of America and Goldman Sachs Group.

The New York fed has deployed some 150 such regulators; a total that is expected to double this fall. The number of such regulators is up 40 percent nationwide to 1,948 since 2006.

And for every action there is an equal and opposite reaction; it wasn’t a week ago that The Wall Street Journal reported Republicans at the New Hampshire debate were busy running against the need for financial regulations. Candidates called for the repeal of Wall Street regulations enacted by the Obama Administration as well as Sarbanes-Oxley, the law enacted in the wake of the implosions at WorldCom and Enron.

The efforts of embedded regulators at Goldman and Morgan Stanley have redoubled since 2008, when Wall Street’s last two independent investment banks became holding companies. The move gave them access to the Fed’s discount window. Since then, the number of embedded regulators at both firms has increased substantially.

If you are facing investment or securities fraud, or other charges through the Securities and Exchange Commission, contact Malecki Law for a free consultation nationwide. Call 212-943-1233.

Additional Resources:

The Regulator Down the Hall, by Aaron Lucchetti, The Wall Street Journal
Candidates Run Against Regulation, by Jonathan Weisman and Neil King Jr., The Wall Street Journal.