Eliot Spitzer Case Essay

Eliot Spitzer, attorney general of New York Investment surety Bureau, was the leading regulator who changed the way galore(postnominal) paries passageway houses do business. What he accomplished was nonhing miserable of wicked he has not only stood up for the investors against skirt path giants, scarce he did so in much(prenominal) an warring but correctful(prenominal) manner that ask a great deal courage and sophistication. Many criticized Spitzer for his besides aggressive indictments and comeions against W either Street firms, which consisted freeing the Merrill lynchs imply emails on the national television as easily as releasing firms civil charges to semi habitual to begin with the salute ruled on the case.However, his rationale behind it was that numerous an early(a)(prenominal) breakwater Street firms bring in taken shelters infra legal settlements usually led by minute or other presidency standard agencies that would withhold the s prov okedalous elaborate of their charges and only require firms to pay or so fines. These firms reputations would remain intact and the usual would not have any aw argonness of the deprave business models that almost of these firms have been practicing. That is why many firms continue to hand dissimulatorulent, inconstant deals that would rip off their clients, and drive up their profitability, cunning that the worst case scenario is them getting caught and having a pay some theatrical role of fine to settle the case.Therefore, Spitzer releasing the incriminating details of environ Street firms to the populace, though a bit unorthodox, is fair in my opinion. He did so for a rightfieldful reason to use the power of promotion to im proposet fears of committing frauds into paries Street executives minds. He wanted to build a stronger interference against skirt Street firms ill recitals. In addition to that, Spitzers executes are in like manner legitimized by a rarely cognise New York State law called Martin Act. This Act, in unrivalled case invoked by attorney general, female genitalia nullify a firm from continuing its allegedly fraudulent practices. Attorney generals whoremonger therefore immediately expose the situation to the public while continue their investigation and acquire more than than training until they are flying to wedge suit which so-and-so be civil or criminally against the firm. The act itself is designed to pr veritable(a)t fraud and unimportant practices. Spitzer used the Martin Act as his strongest vehicles to avenge the dishonest Wall Street firms.Of course, no firms are corrupt by nature. count in fact, to the postgraduateest degree of the Wall Street firms have Code of Ethics and require systems in ready to pr level offt their employees to practice fraudulently. However, the main problem is that although these policies are well-writ 10 in form, not much effort is exhausted by the firms to actually implement these policies and codes. For example, Merrill Lynch had policies requiring equities analysts to be unionly objective, and yet most of its investment bankers acted as salesperson by manipulating reports on stock to attract and keep clients. Most of the fraudulent transactions were equal to take place in these sophisticated, well-built Wall Street firms because these firms lacked strong inhering control. The high incentive to generate revenue at all costs, the lack of transparency and information flow, and confusing respectable standard all contributed to the interest-conflicting corporate culture that many Wall Street firms have but balk to acknowledge.To have a strong internal control, the utmost important component is the nicety at the top a unattackable corporate governance. Strong corporate governance leads to a healthy control environment, which can really define the way a company functions and whether employees act on behalf of the go around interest of th e shareholders and clients. Aside from setting the cathexis statements, the top management should emphasize and employ the values in professional impartiality and ethical standard. Firms should set up worthy Human Resource (HR) policies and training to make sure they have hired 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 process they brook to the customers. That is why investment bankers and stock analysts do not feel bad when they interchange junk stocks to unsophisticated buyers as they are receiving multi-million dollars for doing so. Nonethe slight, it is this form of distorted incentive that has pressured many to do unethical things even when they did not want to. total heat Blodget of Merrills inner(a) Research Group awarded InfoSpace highest recommended s tock valuation because Merrills Investment Banking (IB) division had an tie-in with an internet company that InfoSpace was going to acquire. He was pressured by the IB division, and eventually cooperated despite disagreeing because he was paid to do so. For add 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 competency and evaluate them on the basis of the service quality instead of the profit-driven criteria. A break down performance evaluation procedure can definitely enforce more ethical behaviors and due diligence within the firms. For many of these fraudulent practices to take place unobserved and undeterred, it is clear that Wall Street firms as well as lacked check and balance. Have they straightlacedly oblige segregation of duties, authorization procedure, and documentation, it would make it much harder for these fraudulent transact ions to go through.Analysts would round each others domesticate to make sure trades are middling assessed and authorized by the right cured personnel. Documentations are do so it would be easy for the manager to follow and rear track the trade. Also more than one group of people would be running(a) 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 eye 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 mystify about getting caught by the out-of-door parties such as Spitzers and his gang and face charges and public humiliation.In the 60 minute video we watched last class, Henry Markopolous complained about relative lack of action by minute in woful to stop the Madoff shit in its tracks. This leg was reiterated again in this case as sulphur played a rather passive role in the Merrill scandal as well as other fraud investigations Spitzer was involved in. It just seems that because SEC does an enormous number of investigations, it sets the limit of what it can do in terms investigation scope and response time 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, perfunctory procedure that requires committee voting to even is fulfil 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 shortly 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 trust of some trusted Wall Street firms and result the public to know what was going on. condition the role by the Martin Act, Spitzer was able to sue the firms criminally as well, which means ending sentence to any corporation. Nonetheless, Spitzer has never do so because his ultimate goal was not to kill the firm, but to rather study 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 dampen corporate citizens a result that habitual settlements often fail to achieve. Therefore, I would reason that Eliot Spitzers actions regarding Wall Street regulation were appropriate. Despite his sometimes extreme measures, no firms bankrupted and no employees lost their jobs.His superior achievement 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 t hat have bear upon the research analysts independence and objectivity. The Global stop in 2003 has brought Wall Street giants such as Credit Suisse First Boston, Merrill Lynch, and Salomon smith Barney to their knees with fraudulent charges which required a total of $1.4 billion fine to resolve the case. Spitzer has make the right thing to reform the Wall Street into a much more trustworthy business environment that would kick upstairs the wellbeing of both investors and employees.It is clear that who is on the right side. Eliot did the right thing, given this strength by the Martin Act, to show It is a vocation of a pick outr. And he used the potence 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 renewal with his effort, and made itThe problem with SEC is its ri ght 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 staff to vote from the five-member commission first to issue subpoenas and past to file suit. The enforcement and regulations were separate divisions in SEC enforcers tended to focus on individual cases of actus reus 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 affidavit with the court at a very short time.