More on the NASD Appeal of an SEC Reversal

I have now reviewed the decision from the DC Circuit of the Court of Appeals. The background, as noted earlier, is that the NASD expelled a firm and its principal, the respondents appealed, ultimately to the SEC, which in effect reversed the NASD decision.

The NASD must have been pretty upset, because it filed a petition for review with the Court of Appeals. The problem is, the NASD does not have the authority to file such an appeal.

The opinion states that this has never occurred before, and that it has not occurred before since the NASD does not have the authority to file such a petition.

An interesting opinion, which confirms the historic practice. Respondents can appeal NASD and SEC decisions. The NASD cannot.

Thanks to John Baker from the Fund Law List for the link to the decision, which is online at Pacer.

Morgan Stanley Says 'Record Is Clear' That Florida Judge Erred

Morgan Stanley is appealing the record 1.5 billion dollar fraud verdict against it in favor of Ron Perelman, which included $850 million in punitive damages. Although apparently only a minor issue on appeal, the verdict was in large part the result of severe discovery sanctions imposed by the Court on Morgan Stanley. The court had barred certain evidence because of Morgan Stanley's discovery failures.

SEC Closes Taser Investigation, No Action Taken

Taser International issued a press release disclosing that the SEC has closed its investigation, and has recommended no enforcement action be taken on safety claims the stun gun maker made about its weapons and on another accounting issue.

NASD Challenges SEC's Authority...And Loses

I have not seen the decision yet, but Reuters and the LA Times are reporting that the NASD lost an appeal of an SEC ruling. Yes, the NASD challenged the SEC's authority over it.

Something is very bizarre here, since the NASD gets its own authority from the SEC. It appears that after the NASD expelled a firm and its principal and fined them each $51,000, the firm and broker appealed to the Commission. Nothing unusual there.

The Commission reversed, lifted the explusions and reduced the fines to $1,000. The NASD then appealed, and lost.

I am trying to find the decision, and will update this post when I do. If anyone has more information, I would appreciate the assist.

Langone to mount campaign against Spitzer-spokesman

Billionaire financier Kenneth Langone will on Friday announce he plans to mount a campaign to thwart New York Attorney General Eliot Spitzer's ambitions to be governor of New York state, his spokesman said on Thursday.

This has been an ugly fight since Spitzer sued Langone, but Langone has a point - exactly what did Spitzer do to help investors? As far as I can see, not a thing. He had the big firms in his grasp, got 1.4 billion dollars from them, and NOTHING for investors. He wacked up the money with the other States Attorneys General, got no concessions from the firms, and did nothing to help investors recover their losses.

And then he used taxpayer dollars to mount an expensive lawsuit against Grasso and Langone, to recover money for a private entity - the New York Stock Exchange.

Opposition to Spitzer might be a good idea, and Langone might just be the person to get that ball rolling.

NASDAQ Merger Completed, NYSE Acquisition Approved

NASDAQ announced today that its acquisition of the trading platform of Instinet was been completed. Completion of the deal comes two days after the New York Stock Exchange announced approval of its deal to buy electronic trading company Archipelago Holdings Inc.

http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh36194_2005-12-08_19-08-37_n08330737_newsml

http://today.reuters.com/stocks/QuoteCompanyNewsArticle.aspx?view=CN&symbol=AX.P&storyid=273470+07-Dec-2005+RTRS

SEC Accounting and Auditing Changes Coming?

According to the Associated Press, SEC Chairman Cox is urging a cooperative effort to make accounting rules simpler for reporting companies.

While that is certainly a noble and worthwhile goal, one has to wonder if the accounting rules are the biggest issue facing public companies these days. The complaint that those of us in the trenches here is not about accounting, but rather Sarbanes-Oxley.

But, a simplification of the accounting rules is still a worthwhile goal, under the theory that half a loaf is better than none.

There were two interesting points in the article. First is that the AP is reporting that Chairman Cox is "blaming the corporate scandals earlier this decade in part on the complexity of the current system." I tried to find the original quotes, but the text of his speech is not on line. I am a bit puzzled by this statement, since much of the "corporate scandals earlier this decade" have resulted in criminal convictions of corporate officers. One does not get convicted of fraud because of complex accounting rules.

The other interesting point came at the end of the piece, where the AP reports that "the Big Four firms audit the books of some 80 percent of the publicly traded companies in the United States."

Four firms do 80% of the work? That is a huge number and one that apparently concerns the Chairman. Quoting from the article:

"Is this intense concentration in the market for large public-company auditing services good for America?," Cox asked in his speech. "If you believe, as I do, that genuine competition is essential to the proper functioning of any market, then the answer is no. ... As regulators, we have a stake in seeing to it that our rules promote, rather than restrict, competition."

Let's simplify those accounting rules, re-think Sarbanes-Oxley and can someone call the IRS and make similar simplification suggestions?

Fraud Counts Dismissed from SEC Complaint Against Scrushy

U.S. District Judge Inge Johnson dismissed the two securities fraud counts from the SEC's civil complaint against former HealthSouth CEO Richard Scrushy. The White Collar Crime Prof Blog has the details and analysis.