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               Erik Sirri, The SEC's Top Insider Trading Regulator
          Dismisses The Desirability of Regulating Insider Trading.

           wpe2E.jpg (24887 bytes)

If you have wondered why insider trading is so rampant
            and why the SEC goes after so few insiders who break the law
            and use their insider knowledge of their company to trade their
            company's stock to the detriment of the general public, wonder
            no more.  The head insider trading regulator at the SEC. Erik Sirri,
            does not believe in his mission to level the investment playing field

                         His statements reinforce my belief that the SEC is there simply to give the
             minimum necessary appearance of fairness on Wall Street.  It does just enough to keep
             the public inclined to invest their savings in stocks.  Real punishment of the widespread insider
             trading now extant is not seriously considered.

                            Erik Sirri, the Director of the SEC's division of market regulation stated:
              "In a world of important pricing efficiency, you want insiders trading
because the price will be more
               efficient. That is as it should be."  Then realizing he had gone too far in speaking to his
               audience, he stated that insider trading laws should still exist to protect investors.  But,
               apparently, they just should not be aggressively enforced.  His view is that "investor
               protection" is rapidly becoming little more than full-employment devices for tort lawyers.

                           Sirri was a Professor of Finance at Babson College and Governor of the Boston Stock
               Exchange and a member of the Boston Options Exchange.  His pro-investment banker
               views clearly diminish the amount of protection he would give the small investor.  The materials
               below come from an article
  “Investment Banks, Scope, and Unavoidable Conflicts of Interest,”
               Economic Review, Federal Reserve Bank of Atlanta, Fourth Quarter 2004, pp. 23-35.

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                               Astonishingly, his view is that brokerage analysts should be
"discouraged" (not penalized,
               prosecuted, fined and jailed) for "privately disparaging stocks as an advisor to larger institutions
               while publicly recommending them as "strong Buys". He accepts that the analyst knows he must
               be a stock's promoter when his firm is, or wants to be, that company's  investment investment banker,
               a very lucrative function.  Amazingly,
Sirri suggests that the investment community discounts such
               advise already, because the conflict of interest is known.
  HARDLY!   Sirri maintains "though there
               is evidence that analyst buy/sell recommendations are biased, the market appears to understand and
               correct for this bias."  The truth is very different. 
The public is very often fooled by such
               recommendations.   They foolishly trust their brokerage, because they are not told about the
               conflict of interest.
Sirri also denies that the "underwriting mandate is not 'bought' through the
                issuance of biased or overly optimistic research."  Strangely, he then goes on in this article to quote
                research that shows that "the market IS fooled by the biased recommendations of underwriter
                analysts". (Michaely and Womack)

                          He raises the issue of the conflict of interest occurring when the research analyst provides
               one opinion for the brokerage's own trading purposes and another for the public.   "Such ... conflicts
               abound."   Trading ahead of of their public customers "is of course prohibited."   But "trading
               as principal against uninformed retail flows is a clear conflict of interest by an investment bank
               that has to date passed muster with regulators."  He offers another example.   What if the
               analyst reaches the conclusion that a particular stock should be downgraded but the
               firm or its biggest institutional clients have a considerable position in the stock?  If the analyst
               puts out the Sell to the public, the firm could hurt its relationship to its biggest clients or
               damage its own trading.  Sirri is clearly sympathetic to the brokerage and not willing to
               demand that the public has an equal right to get a timely Sell recommendation.  
Sirri assures us
               that there is "no strong linkage between analyst actions and harm to investors.  He questions the
               need to separate investment banking from research.  Without proof, he further states that the
               quality of such independent research has fallen. 

                           Anyone sincerely interested in learning the truth about how small investors have suffered
               at the hands of Wall Street insiders should read any of the many books on the subject.
                   "Detecting Wall Street Lies: An Individual Investors Guide to Profitability."
                            By Jordan Elliot Goodman, 2003
                  "Is Your Broker Acting In Your Best Interest?" by Glenn Curtis

                "Understanding Dishonest Broker Tactics"
Front Page: Wall Street to Reform Analyst Conflicts"
                    Stock Fraud Lawyers - California Stock Broker Fraud Attorneys ...

                                        Everyone Knows Wall Street  Is Rigged
New York Attorney General Eliot Spitfire reached a $100 million settlement with Merrill Lynch in 2003 for
             misleading investors with questionable research. However, in October of 2003, U. S. District Judge Milton Pollack
             dismissed nine lawsuits against Merrill Lynch and Company. Judge Pollack stated that an investor would have to
             be a moron to not know that Wall Street is rigged. Judge Pollack wrote "The plethora of public information" telling
              the story about analysts "would have required even a blind, deaf or indifferent investor to take notice."
                             ( www.wlf.org/upload/9-19-03orr.pdf    )
               (Source: http://spot.colorado.edu/~kozar/TechAnalysis.html )

wpe2D.jpg (21976 bytes)   "SEC looking at bankers' books for stealth subprime exposure

                 There's never only one cockroach:The Wall Street Journal says that the SEC is scrutinizing the books of the
           major brokerage firms to make sure that they're not sweeping subprime associated losses under the rug:

The SEC is looking into whether Wall Street brokers are using consistent methods to calculate the value of subprime-mortgage assets in their own inventory, as well as assets held for customers such as hedge funds, the same people said. The concern: that the firms may not be marking down their inventory as aggressively as assets held by clients.

While the issue is a technical one, and such checks occur routinely, it is sensitive for the markets. That is because, at least through their latest earnings reports, few big Wall Street firms have reported big subprime losses despite the turmoil roiling the markets. "

         (Source: )