Why SEC Needs New Chair

Chidem Kurdas

Robert Allen Stanford stayed one step ahead of the law and kept his con game going against the odds for some two decades, until the US finally nabbed him in the wake of the Bernard Madoff scandal.

Over the years, as many as thirty brokers who had worked for the Stanford company complained about their former employer to the brokerage industry regulator NASD and its successor FINRA. They had doubts about the certificates of deposit Stanford wanted them to sell – in fact these CDs were fake – and some of them warned of fraud. See  Political Sticky Wicket: The Untouchable Ponzi Scheme of Allen Stanford

In each case that went to arbitration, NASD and FINRA panels ruled in favor of Stanford. The whistle blowers were forced to reimburse his legal expenses as well pay back bonuses they had received from the company. Meanwhile Stanford executives spread the word that these were not good people to employ, destroying their job prospects.

During the years brokers complained in vain to NASD and FINRA about the Stanford company and its murky CDs, Mary Schapiro held top positions at these organizations. She became president of the NASD regulatory unit in 1996, NASD chair in 2006 and the chief officer of FINRA in 2007, when it was formed.

President Barack Obama appointed her chairman of the SEC in January 2009. Recently it was reported that she may be resigning.  That sounds like an opportunity.

Her track record at NASD and FINRA does not inspire confidence. If  the Commission is to tackle major fraud more effectively than it did in the past, someone else should lead it.

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