The S.E.C.'s At it Again

The destructive force of the 2008 financial recession was nothing to be trifled with. After sifting through the flotsam and jetsam of various companies' and funds' remains, both businessmen and lawmakers are desperately searching for ways to mitigate such disasters in the future. While the primary concern for many on Wall Street has been getting the firm they work for back in the black or clambering out of their fund's BBB rating, the government has decided this is the opportune time to reach it's hand into America's financial affairs. One may ask, "How can the government prevent such recessions from happening again? Hasn't the Fed been taking care of this problem with interest rate cuts, bailouts, and executive compensation cuts?" Yes, but the extent of success has been limited, at least in the short term. However, hen looking around the table of government entities, it is clear that one body has been stepping up their game recently.

That's right, the S.E.C. has become a legitimate force to be reckoned with. Not only have they been making headlines with their massive Galleon Group bust and sizzling snapshots of their ringleader, Mr. Raj Rajaratnam (so affectionately dubbed "RajRaj") doing the perp walk with some blue-coated, Federal agent badasses, but they have also been revamping their internal policies for future crisis control. As an emergency precaution during the later months of 2008, the S.E.C. placed a ban on financial transactions resulting in what is known as "shorting" or "short-selling" in an attempt to control traders' ability to profit on the loss in value of equities and securities.

After the tornado siren had been turned off and the recession was considered "over," it would be safe to assume that financial activity should have resumed a somewhat normal modus operandi. Not quite. The S.E.C. has begun discussing permanent policies to be enacted that would severely limit short-selling on a hush-hush basis, meaning that more transactions will have to be disclosed to the public in order to diminish the sudden and uncontrolled tank in stock prices that often result from large transactions.

This proposed action has many investors in an uproar, including Richard Baker, president of Managed Funds Association. When discussing the negative implications of such action, the president stated, "This independent study demonstrates that recently adopted public disclosure rules in the U.K. have impeded equity market liquidity, decreased trading volumes and interfered with efficient price discovery in affected stocks, driving up transaction costs for mainstream investors and burdening businesses with a higher cost of capital."

Regulators within the S.E.C. are keen on coming to an agreement whether to pursue such action, but at this time one can only speculate how far the government will go to ensure "financial stability" in America.

Gabriel C. Suprise, Group 2