Former SEC Chairman Slams Dodd-Frank Act

The New York Times reports that Harvey Pitt, who served as Chairman of the Securities and Exchange Commission from 2001 to 2003, testified before the Senate Banking Committee that the Dodd-Frank Act “is unduly complex, adds more layers of regulatory bureaucracy to an already over-bloated bureaucracy, makes financial regulation more cumbersome and less nimble than it already was.” His objections revolved around rules that favor institutional investors over regular shareholders, the new SEC whistleblower program, and the ineffectiveness of the legislation in preventing another financial meltdown.

Court Rules that Gupta Singled Out by SEC

A U.S. District Court ruled that Rajat Gupta, who was allegedly involved in the Galleon Group insider trading case, could move forward with his lawsuit alleging that the Securities and Exchange Commission violated his rights when it filed an administrative action instead of a criminal case. According to Bloomberg, the judge said that Gupta, formerly of Goldman Sachs, was “treated substantially disparately from 28 essentially identical defendants” by the SEC. Gupta’s suit alleges that the SEC’s administrative action denied him rights he would have had if the suit had been filed in federal court.

Judge Throws Out SEC ARS Suit

Business Week reports that U.S. District Court Judge granted Regions Financial Corp’s Morgan Keegan brokerage unit a summary judgment, rejecting Securities and Exchange Commission arguments that the company misled auction-rate securities investors before the 2008 market collapse. While the SEC alleged that Morgan Keegan intentionally misrepresented ARS liquidity risks, the judge found, “Failure to predict the market does not amount to securities fraud.” The SEC may appeal the decision.

Stock Market Operators Ask SEC for Unsupervised Access Rule Delay

Bloomberg reports that the New York Stock Exchange, Nasdaq, Bats Global Markets, and Direct Edge Holdings issued a joint letter to the Securities and Exchange Commission requesting that the July 14 ban on unsupervised market trading be delayed until November 30. The rules, adopted as part of the Dodd-Frank Act implementation, regulate how brokers send orders to venues, and would ban unfiltered access to the markets.

SEC Says “Flash Crash” Not Preventable

Last May, a “flash crash” sent the Dow plummeting 700 points before it bounced back up a few minutes later. Reuters reports that, on the one-year anniversary of the flash crash, Securities and Exchange Commission Chairman Mary Schapiro said that the SEC has implemented some reforms, but that there’s no guarantee that another flash crash will be prevented. To date, the agency has implemented so-called circuit breakers, rules for mitigating mistaken trades, a prohibition on stub quotes, and a ban on certain types of market access. Schapiro indicated that, in the coming months, the agency would issue rules on large trader reporting and a consolidated audit trail. The SEC is also considering whether or not to charge high-speed traders fees, regulate high-frequency traders, and whether to regulate or prohibit anonymous trading.