Wednesday, September 16, 2009

Judge Rakoff is Right

US District Judge Jed S. Rakoff has hit the nail on the head in the $ 33 million settlement between the SEC and Bank of America. The issue is the payment of 2008 bonus payments to Merrill Lynch employees without accurately informing the acquiring firm's shareholders -- the shareholders of Bank of America. As Judge Rakoff correctly notes, the shareholders of Bank of America are the victims. Why should the victims be hit with a $ 33 million fine?

Why hit the shareholders, asks Rakoff and he is absolutely right? What did the shareholders do wrong in this case? They were the injured party. It is typical of the SEC to complain about inadequate disclosures to investors and then turn around and penalize those self-same investors with a fine. Who would pay the $ 33 million settlement that the SEC has levied on Bank of America? The shareholders, of course.

This is typical policy that extracts payment, not from the guilty party, but from the innocent victim. Why? The innocent victim has a deeper pocket and an inability to protest this outrageous settlement.

Three cheers for Judge Rakoff