Inquiry 4 BRAINSTORM!!!

1.  Religion at Miami - Songs, tshirts, skit
2.  Underage Drinking - Documentary, skit, news cast
3.  Smoking at Miami - Shirts, Posters, skit

I would like to do my topic on religion.  I think it would be very interesting to investigate the religions that are present in the student body.  I believe that through the modes listed above my group would be able to really set a certain tone for each group so that we are able to understand some basics of that religion.

Securities and Exchange Commission

Gabe Kimble

Strickland

MWF 8:00

Securities and Exchange Commission

The Federal Securities and Exchange Commission, commonly known as the SEC, is a regulatory agency of the United States government.  It was created in 1934 under the Securities and Exchange Act passed by congress (What We Do).  This paper will analyze how the Securities and Exchange Commission came into existence, cases of which the SEC has gotten involved with, and the impact that the Commission has on college students more specifically business students from Miami. 

Following the stock market crash of 1929, which led into the great depression, the government realized that something had to be done to regain the public’s confidence in the markets (What We Do).  To do this, congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934, together these created the SEC (What We Do).  The SEC was formed to bring trust back into the markets; they created regulations that provided the public with more reliable information (What We Do).  The SEC requires all publicly traded businesses to file statements containing financial and other pertinent data to the commission (GPO Access). 

Back in May of 2004 The Onion published an article regarding a recent regulation from the SEC (Ritholtz).  According to the article the new regulation, SEC rule 206(b)-7, requires CEO’s to humble themselves before accepting large bonuses.  Mary Schapiro, an SEC chair, is quoted saying, Never again will they be able to receive massive bonuses unless, at a minimum, they flash a gee-I-don’t-think-I-should expression and say something like ‘Well, all right, but only if you insist’ first.” (Ritholtz).  This article would have us assume that when the CEO humbles himself that the company may re-think its decision and instead not give it to him or her.  This would be a type of check and balance type of thing so that CEO’s are not paid large sums of money, when the rest of the public is suffering from poor economic conditions.             

A well known business scandal is Enron.  The Enron scandal produced the Sarbanes-Oxley Act, which requires full disclosure of financials for publicly traded companies (Sloan).  Enron was a major corporation with hundreds of employees.  When the company went under it took all of the jobs that it had provided as well as all of the 401(K)s that it gave to its employees (Sloan).  According to Fiduciary Counselors Inc, 16,500 people were affected by Enron.  Roger Boyce, owner of 26,000 shares of stock, saw a tremendous financial loss.  His stocks use to total approximately 2 million dollars, now his 26,000 shares of stock total less than $10,000.  This is an example of how severely the SEC can affect communities and individuals.  It destroyed thousands of jobs and futures for the Texas community (Sloan).  Though the corrupt business was stopped and its top executives punished the employees were left to dig themselves out of financial ruins.

  According to the Houston Chronicle, compensation for those affected was 265 million dollars in settlements (Hayes).  However, due to a data error some were not given their deserved portion of the settlement while the others were overpaid.  Due to this, the court has taken over the rest of the funds until there is a resolution (Hayes). Employees are a major stakeholder in the business world.  If they lose their jobs it affects their entire family, and for that reason, if the closing of a company leaves thousands of people unemployed and without their retirement plans, the number of people affected could very easily be doubled or tripled.  With thousands suffering financial problems there is less money to be paid into the city and state taxes.  Public schools and services are paid for through taxes and if the citizens are unable to put as much money into the system as before, then children will not be able to receive a top education. 

Another case is SEC versus Sight Resource Corporation.  In this case the SEC sued; Duane Kimble, my father and at the time CFO of the company, along with former CEO Carene Klunker (Commission).  My father faced prosecution under the Sarbanes-Oxley Act.  He had unknowingly signed off on fake financial statements, which should have been caught by the people who were below him.  However, as he was the Chief Financial Officer, he should have technically been aware of everything that was going on within his department.  That includes catching errors made by people performing entry level work.  The company later went bankrupt and had layoff its employees.  Speaking from personal experience, the SEC acted as a bully.

The New York Times put out an article earlier this year in which it discussed the SEC as being a corrupt agency.  The SEC was asked to investigate Allied Capital and their financial statements (Henning).  When the SEC commenced their investigation and went into a meeting, of which only one person was representing the SEC, to discuss possible charges against the company they met their opposition, who was none other than a former SEC employee.  Allied Capital used this person as a tool.  They claimed that someone who had previously worked for the SEC was “not going to be doing anything illegal.”  The story alleges that because Allied Capital had a former SEC employee working for them, they were given a slap on the wrist. The company was charged with a cease-and-desist order that consisted of no penalty towards the company.  The cease and desist order is the least severe of any penalty the commission can give out (Henning).

Through these cases I have deducted that unless you are an investor or a customer of the investigated business the SEC is nothing but a tyrant to you.  The SEC has helped protect consumers and investors from criminals who misuse their funds and lie to them.  They investigate fraudulent activity and enact regulations to ensure transparency and fair business practices. However, the employees are commonly ignored or if not they are treated poorly.  Drawing conclusions from the article regarding Allied Capital, I have also come to assume that if you have a former SEC employee working for your company then you are in the clear.  The article has shown me what kind of corruption can go on in business/government.  The Allied capital case was clearly a conflict of interest case.  Conflicts of interests are something that a good business is supposed to steer away from and what the SEC is partly there to enforce.

The role of the farmer business school is to prepare students for their future business careers. Part of preparing students requires equipping them with the knowledge of federal regulations and laws.  The business world is very complex and regulated place and as such, can be dangerous if one does not understand certain procedures.  In order for the business students to be well off, it is imperative for them to become familiar with the Securities and Exchange Commission and how they came into existence.  Big businesses will expect students to know what conflicts of interests are and the laws and regulations that they must work under so that the business stays in good standing. 

Businesses do not have the time to put their employees through a period in which they teach ethics and all laws that govern how to successfully do their job.  That would take too much time and money which would affect the bottom line of the company.  The universities are responsible for teaching students how to operate within a business, that’s why it has become so essential for people to obtain a degree.  Businesses look for the best students at the best universities because they want quality employees who know their way around the procedures, because those are the employees that will work hard for the company and be able to introduce new ideas.

Since the SEC is a large regulatory agency it has the ability to impact places as busy as New York, New York to rural communities such as Oxford, Ohio.  Entrepreneurs who go off and start their own corporations will need to know what laws to abide by and how to fully disclose their information so that they are not investigated by the SEC.  I have learned that if you get on the wrong side of the SEC you will stand no chance.  Though the SEC has helped stop corrupt business I have formed the opinion that they are a tyrannical type of agency and that even the commission has committed fraudulent business practices.

Works Cited

2009. GPO Access. 23 October 2010 <http://frwebgate1.access.gpo.gov/cgi-              bin/TEXTgate.cgi?WAISdocID=MpKI05/0/1/0&WAISaction=retrieve>.

Enron Savings Plan Begins Distribution from Newby Settlement. 23 February 2010. 31 October 2010 <www.seopressreleases.com/enron-savings...settlement/6745 >.

Hayes, Kristen. Data error stalls Enron payouts to employees. 3 July 2007. 31 October 2010 <http://www.chron.com/disp/story.mpl/special/enron/4939659.html>.

Henning, Peter. How Not to Run an S.E.C. Investigation. 24 March 2010. 31 October 2010 <http://dealbook.blogs.nytimes.com/2010/03/24/how-not-to-run-an-s-e-c-investigation/>.

Kimble, Duane. Former CFO of Sight Resource Gabriel Kimble. 20 October 2010.

"Litigations Realease NO. 19623/March 27,2006." 23 October 2010 <http://www.sec.gov/litigation/litreleases/lr19623.htm>.

Ritholtz, Barry. "New SEC Regulations for CEO's." The Onion 24 May 2010: 1.

SEC News Digest ISS. No. 1:05CV642. 6 October 2005.

Sloan, Alan. "Laying Enron To Rest." News Week 5 June 2006: 6.

"What We Do." 20 October 2010. Securities and Exchange Commission. 23 October 2010 <http://www.sec.gov/about/whatwedo.shtml>.