Eliot Spitzer Case Essay

Eliot Spitzer, lawyer general of New York Investment breastplate Bureau, was the leading regulator who changed the steering many seawall highroad strongs do business. What he accomplished was nonhing short of extraordinary he has not only stood up for the investors against groyne street giants, but he did so in such an aggressive but disciplineful manner that ask much courage and sophistication. Many criticized Spitzer for his overly aggressive indictments and actions against protect Street pie-eyeds, which consisted releasing the Merrill Lynchs incriminating emails on the national picture as well as releasing firms civil charges to globe onwards the court rulight-emitting diode on the show window.However, his rationale behind it was that many beleaguer Street firms put one over taken shelters under legal settlements usually led by SEC or former(a) government regulation agencies that would carry on the s sightdalous details of their charges and only require firm s to pay some finelys. These firms reputations would continue intact and the public would not have any aw atomic number 18ness of the indulge business models that many of these firms have been practicing. That is why many firms continue to practice unsound, deceitful deals that would rip off their clients, and drive up their profitability, kip downing that the smite case scenario is them getting caught and having a pay some type of fine to settle the case.Therefore, Spitzer releasing the incriminating details of groin Street firms to the public, though a bit unorthodox, is fair in my opinion. He did so for a right handful reason to use the power of publicity to im inventiont fears of committing duplicitys into fence Street executives minds. He wanted to build a stronger deterrent against skirt Street firms ill practices. In addition to that, Spitzers actions argon similarly legitimized by a rarely known New York State impartiality called Martin Act. This Act, once inv oked by attorney general, tramp prohibit a firm from continuing its allegedly fraudulent practices. Attorney generals keister then directly expose the situation to the public enchantment continue their investigation and come across more discipline until they are ready to file suit which fag be civil or reprehensively against the firm. The act itself is designed to forestall fraud and deceitful practices. Spitzer used the Martin Act as his strongest vehicles to punish the dishonest contend Street firms.Of course, no firms are corrupt by nature. yield in fact, roughly of the Wall Street firms have Code of estimable motive and Control systems in aim to prevent their employees to practice fraudulently. However, the main task is that although these policies are well-written in form, not much effort is spent by the firms to actually implement these policies and codes. For example, Merrill Lynch had policies requiring equities analysts to be totally objective, and yet most of its investment bankers acted as salesperson by manipulating reports on acquit to cajole and keep clients. Most of the fraudulent transactions were able to take emplacement in these sophisticated, well-built Wall Street firms because these firms lacked strong internal control. The high fillip to generate revenue at all costs, the lack of transparency and information flow, and confusing ethical standard all contributed to the interest-conflicting bodied culture that many Wall Street firms have but refuse to acknowledge.To have a strong internal control, the utmost all important(p) component is the tone at the top a solid corporate validation. Strong corporate governance leads to a healthy control milieu, which can really define the way a company functions and whether employees act on behalf of the best interest of the shareholders and clients. forth from setting the mission statements, the top management should emphasize and enforce the set in professional integrity and ethical standard. Firms should set up prudish Human Resource (HR) policies and training to make sure they have engage the right people who will do the right things. One of the major weaknesses in many Wall Street firms is their compensation structures. Many, if not all, Wall Street employees are rewarded by how much revenue they generate for the firm instead of the quality of service they provide to the customers. That is why investment bankers and stock analysts do not feel bad when they sold junk stocks to open buyers as they are receiving multi-million dollars for doing so. Nonetheless, it is this form of distorted incentive that has pressured many to do unethical things even when they did not want to.Henry Blodget of Merrills innate Research Group awarded InfoSpace highest recommended stock rating because Merrills Investment Banking (IB) variableness had an affiliation with an internet company that InfoSpace was going to acquire. He was pressured by the IB division, and in conclusion cooperated despite disagreeing because he was paid to do so. For contributing to Merrills IB operations, Henrys annual guaranteed minimum cash bonus drastically increased from $3 million in 1999 to $12 million in 2001. HR should make more commitment to employee competence and evaluate them on the basis of the service quality instead of the profit-driven criteria. A better surgical operation evaluation map can definitely enforce more ethical behaviors and due diligence within the firms. For many of these fraudulent practices to take place un detected and undeterred, it is clear that Wall Street firms also lacked check and balance. cook they properly enforced segregation of duties, authorization procedure, and documentation, it would make it much harder for these fraudulent transactions to go through.Analysts would review each others spurt to make sure trades are fairly assessed and authorized by the right senior personnel. Documentations are do so it would be easy for the charabanc to follow and back track the trade. Also more than one base of people would be working on the trade so they can all take responsibility for it if anything goes wrong. With proper check and balance, people would have less leeway to make ill-advised deals to the investors knowing that there are extra sets of eyes watching over them. These internal controls would have detected and prevented fraudulent transactions before they even had a chance to proceed. Wall Street firms would not have to worry about(predicate) getting caught by the external parties such as Spitzers and his crew and face charges and public humiliation.In the 60 minute video we watched last class, Henry Markopolous complained about relative lack of action by SEC in pitiable to stop the Madoff scandal in its tracks. This point was reiterated again in this case as SEC played a sort of passive fiber in the Merrill scandal as well as other fraud investigations Spitzer was involved in. It just see ms that because SEC does an enormous number of investigations, it sets the limit of what it can do in terms investigation scope and response quantify to the fraud. Therefore, it made a strong enforcers like Spitzer even more if an important role for the public investors. Comparing to SECs long, formal procedure that requires committee voting to even issue a subpoena, Spitzers attorney generals office was a much more flexible, agile place where they can file suit with the court to take actions against fraud in a very short period of time.Spitzers use of publicity, although triggers criticisms such as subverts due process to release undigested investigative files to the media before charges are filed, was Spitzers way to show public the shocking betrayal of depone of some trusted Wall Street firms and tolerate the public to know what was going on. Given the authority by the Martin Act, Spitzer was able to sue the firms criminally as well, which means death sentence to any corporati on. Nonetheless, Spitzer has never make so because his ultimate goal was not to kill the firm, but to rather remove the tainted spots from the firm, whether it is its CEO or any other executive position, so the firms can learn their lesson and become better corporate citizens a result that ordinary settlements often fail to achieve. Therefore, I would conclude that Eliot Spitzers actions regarding Wall Street regulation were appropriate. Despite his sometimes extreme point measures, no firms bankrupted and no employees lost their jobs.His greatest accomplishment came when he pushed Wall Street to its greatest reform since the Great Depression. On 2002, SEC, regulators, and the ten largest Wall Street firms agreed in principle to revise firms compensation plan to avoid conflicts of interest that have affected the research analysts independence and objectivity. The planetary Settlement in 2003 has brought Wall Street giants such as belief Suisse First Boston, Merrill Lynch, and S alomon Smith Barney to their knees with fraudulent charges which required a total of $1.4 one million million fine to resolve the case. Spitzer has done the right thing to reform the Wall Street into a much more trustworthy business environment that would enhance the wellbeing of both investors and employees.It is clear that who is on the right side. Eliot did the right thing, given this authority by the Martin Act, to show It is a duty of a voter. And he used the authority for a good cause, which pushed Wall Street as SEC, Spitzer, I think Spitzers practices are fair because although he has the authority to He never did so because, but to rather allow the firms to learn their lesson The Wall Street was successfully pushed to a reformation with his effort, and made itThe problem with SEC is its conservative approach toward fraudsters. They are slow at reacting to frauds. Has too many investigations SEC has to handle. SEC has a formal procedures requiring the round to vote from th e five-member commission first to issue subpoenas and then to file suit. The enforcement and regulations were fall apart divisions in SEC enforcers tended to focus on individual cases of wrongdoing while regulators looked at the overall pictures. Compare to SEC, Spitzer looked at both, and the attorney generals office was a flexible, agile place where they can file an vow with the court at a very short time.