Catching Stock Market Crooks
Patrolling all US markets is the Securities and Exchange Commission, better known as the SEC. It’s in charge of keeping the peace in markets, protecting the “little guy,” and rooting out corruption. Of course, the bad guys take a dim view of the regulatory agency, seeing it as merely a paper-pushing office full of 9-5 accountants in grey suits. But that would be their downfall!
Right now, in a copper-insulated laboratory, government brainiacs are extracting information from broken phones and computers. Traders engaged in suspicious activities are being screened by detectives who know everything about everyone. And companies up to no good are being stalked from afar by lawyers who’ve seen it all before. The SEC’s operators hardly break a sweat day-to-day, and check out some of their numbers!
This year, the forces of order returned over a billion dollars to defrauded investors. They brought the hammer down 862 times on individual cases of stock manipulation, spoofing, scamming, and Ponzi scheming, and they fined business bandits $4.2 billion for their troubles.
Now, who’d have thought, an entire investing approach exists around betting against the SEC’s future corporate convicts. There are levels to it. Short sellers make money when stocks go down, but activist short sellers make money when they tell everyone why a stock should go down, and then it goes down.
Some of the most significant activist market vigilantes include Muddy Waters Research, Jim Chanos, and Citron Research. They build the case, short the stock, run the propaganda, and profit from a sort of bounty as sentiment turns sour. Many of their picks end up going to zero after being ratted out and put before the SEC.
An extra pair of hands they may be, but conducting their business in that order of short selling before denouncing has prompted many to suggest market manipulation. Wouldn’t that be a breaking news story to bring you one day; “SEC charges SEC wannabes for exposing fraudsters charged by the SEC!” Oh, the markets never get boring!