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Firms commit securities fraud again and again, despite penalties and promises

As part of their settlements of securities fraud suits, many large Wall Street firms have signed agreements to never again violate antifraud laws. It may strike some as surprising that a promise not to break the law was required, but a New York Times article makes it clear that neither the promise nor the penalties extracted kept these firms from repeat offenses.

The Times analyzed SEC enforcement actions over the last 15 years and found at least 51 cases in which 19 Wall Street firms broke antifraud laws they had agreed never to violate.

The article points out how small the price of settlement is for many of these firms. The only real deterrent for executives of companies that earn massive illegal profits is to target them personally: through criminal prosecution where called for and through the aggressive use of clawbacks.

Wall Street pays lip service to “compliance” but it’s time to put that into action. Bonuses should reflect a reward for legal behavior, not simply an employee’s contribution to the bottom line even if that was the result of illegal activities.

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