Too good for the SEC? (2)
published 23 Mar 2009, MST
One day, a woman came to the office of Securities and Exchange Commission Chairman Fe Barin and showed her several post-dated checks which had, by then, proven worthless. The woman had put her money in one of the affiliate firms of Legacy Consolidated Plans, Inc. and was given the checks for the promised returns. Barin was speechless.
What can you say to these people, she asks. Most of them did not have the intellectual sophistication to question the transactions they were nudged into by the people they were doing business with. The logical reaction to the too-good-to-be-true promises would be to ask around and compare whether the same things were done by other players in the industry. Alas, the thought did not even cross most of these people’s minds.
But some of those who should have known better simply decided to close their eyes. The rewards were just too good.
“It’s a pity,” Barin says of the fate of the thousands who had parted with their hard-earned funds. “We should go after this kind of businessmen.”
But even hauling off the likes of Celso delos Angeles to jail will not bring back the life savings of these people when they need it most, or compensate for their anxiety. At best, one can only be angry, read reports on yet newer charges filed against Legacy, sit back and hope for the best.
In the meantime, one wonders whether the systems in place at the SEC can prevent a repeat of the Legacy fiasco.
Barin believes that the objectives of businesses do not have to go against the interests of the public and that regulators should not take on the role of an all-knowing prober into the affairs of companies. Barin says that if only companies operated as they should, the SEC could actually help them to stay in business longer. The role that the private sector plays in nation building is just too big.
Still, Barin concedes that her agency has not been doing enough in the past. There are just too many laws to implement—the Securities Regulation Code, the Corporation Code, the Investment Company Act, the Investment Houses Law, the Securitization Act, the Foreign Investments Act, the Lending Company Regulation Act, the Personal Equity and Retirement Act and the Credit Information System Act. It’s just not humanly possible. The SEC needs to beef up its 400-person workforce by 50 percent if it wants to be more effective.
Barin also says they should do more than just wait for reports. They need to be more pro-active. And so changes will be implemented soon.
We hope these changes would include the appointment of more CPA-lawyers to crucial posts in the commission. These are people who can actually understand and gauge the real financial health and viability of companies. There also has to be accountability among commissioners in charge and their reporting to the commission en banc, so that one cannot say “the commission is a collegial body” on one hand and yet steer clear of decisions made, on the other, claiming such matters do not fall under one’s turf.
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Barin says the biggest challenge she probably faces as chief commissioner is “to change people’s misconceptions about the role of the SEC—what it can and cannot do, should and should not do.” Right now, however, she gives us conflicting signals. On one hand, she denies regulator should assume an all-knowing role. On the other, she seems to accept and in fact acknowledges that the commission has not been effective in pre-empting sorry developments such as the Legacy mess. Hence the promised reforms.
Obviously, the lady has been under a lot of pressure, parrying off attacks on her person as if her job were not daunting enough. For instance, she denies having given former Commissioner Jesus Martinez too much of a free hand. She agrees that he has to face “whatever music he may have created for himself.” Now her own husband is said to have had dealings himself with Delos Angeles (Barin’s answers to follow-up questions on this matter did not quite make this column’s deadline.)
It’s definitely not the best of times for the chairman. Her own family (she has six children and seven grandchildren), whose love and support sustain her, she says, has asked her if it was worth staying on. But Barin has decided: she is not quitting because of this mess.
So for the next two years (her term ends in March 2011), after the Legacy fiasco has subsided and those guilty are hopefully locked up for life, Barin would most likely be at her desk, poring through papers, striving to be the “reasonable regulator” she aims to be.
Is there enough time for a turnaround, not just for Barin the leader but the SEC the institution? We hope the lady realizes that lofty ideals are not enough. Being reasonable is good but being tough is needed to make sure crucial reforms are started—and sustained.
The septuagenarian is hounded by perceptions that she is weak and unable to hold her ground in a not-so-pristine environment. Since she has decided to stick it out at the commission, Barin has to prove this is a misconception, as well. And she has to do it fast.