A New York Times investigation has turned up something intriguing relating to SEC enforcement actions against bulge bracket banks.

The banks have routinely won exemptions to various restrictions that would normally accompany enforcement actions. These restrictions typically would make it harder for companies to underwrite debt and equity as well as manage mutual funds. Regulators make these exemptions for banks to “keep stock and bond markets open to companies with legitimate capital-raising needs.” 

One SEC official was quoted, saying that “The purpose of taking away this simplified path to capital is to protect investors, not to punish a company. You’re not seeing the times that waivers aren’t being granted, because the companies don’t ask when they know the answer will be no.”  

What determines when a company will be granted a waiver?

The key is whether the crimes involve false or misleading information communicated about the company itself. But, as the article notes, that has not always held.

Bank of America, for example, by this standard should have been denied any waivers. The bank instead was able to successfully make waivers a condition of settlement. JPMorgan was held up as the poster child of waivers. It “has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers,” arguing that it has “a strong record of compliance” with laws.” Citigroup however was recently denied a waiver and must file lots of paperwork in support of routine stock and bond offerings among other things.

For more:
- here’s the article

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