Well, that certainly didn’t take long, now did it?
As noted here this past Sunday, R. Allen Stanford’s Stanford Financial Group has been well-known around Houston as a smoke-and-mirrors investment outfit for quite awhile. Joe Weisenthal over at Clusterstock has the best overview of Stanford’s collapse, while Felix Salmon does a good job of summarizing the SEC complaint and asking the right questions about the principals of the firm. The Chron’s Kristen Hays and Tom Fowler provide the local angle here.
Meanwhile, the Chronicle’s business columnist Loren Steffy bemoans the fact that government regulators — who have been investigating Stanford for at least the past four years — were again behind the knowledge curve in protecting investors from Stanford’s apparent investment fraud.
However, Steffy’s expectations are simply misplaced. A government regulatory body will rarely be as effective or efficient as the information marketplace in preventing or mitigating investment fraud loss. Had the investors in Stanford relied on Houston’s information market in deciding on whether to invest in the company, they wouldn’t have needed the "protection" of government regulation.
Here is part of what FINRA was told in an arbitration filing in Oct ’07 in which both Stanford Financial and the president of the b/d (Danny Bogar) were named. Why the hell did FINRA do nothing? That is part of what needs to be investigated:
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“The Respondents were well aware of their responsibilities pursuant to industry
rules, regulations as well as federal securities laws. Each individual Respondent, acting in the role of a supervisory principal, chose to act with conscious indifference to their obligations under the law and to allow Stanford Group Company, a FINRA member firm, to conduct business in an unlawful manner. When the unlawful business practices began to affect the ability of the Claimant to effectively perform his assigned tasks and the Claimant sought to identify or discuss various problems, the Respondents chose not to investigate or rectify any unlawful business practices. Rather, they chose to retaliate against the Claimant, terminated his employment and purposely and maliciously defamed his professional reputation.
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The unlawful and retaliatory actions of the Respondents are unconscionable.
Disturbingly, the Respondents have failed to accept responsibility for their unlawful acts.
They have given no indication they have ceased to act in an unlawful manner and they
have given every indication that should the circumstances present themselves, they would again retaliate against any employee who was so bold as to choose not to ignore unlawful business practices. Insofar as the rules, regulations and laws the Respondents knowingly violated were enacted to protect the public interest, there exists an extreme probability that the interests of the public are today at risk.”