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  • Writer's pictureKirk Hartley

New York Jury Urges SEC to Continue Investigating the Finance Industry

Yesterday, a New York federal court jury issued a message urging the SEC to continue to investigate the financial industry. The statement was issued by the jury after it returned a verdict in a civil case filed by the SEC against a mid-level employee (Brian Stoker) of a mega-bank. In short, the SEC’s civil claims asserted negligence by the employee in writing securities investment documents that failed to tell investors that the bank was using its own money to bet against the securities it was offering to investors. The defense argued that the defendant was being offered up as a scapegoat for the actions of his bosses. The jury accepted the defense. But the jury also went further, and took the unusual step of issuing the following statement urging the SEC to continue investigating the finance industry:

“This verdict should not deter the S.E.C. from investigating the financial industry, to review current regulations and modify existing regulations as necessary."

"The statement appeared to echo frustration felt by many Americans that Wall Street executives had not been held responsible for its questionable actions leading up to the financial crisis, and that financial industry reform had thus far been inadequate.

In his own statement, Robert Khuzami, the S.E.C.’s director of enforcement, appeared to take the jury’s message to heart. “We respect the jury’s verdict and will continue to aggressively pursue misconduct arising out of the financial crisis,” he said.


As Mr. Stoker prepared for trial, his former employer agreed to pay $285 million to settle a civil complaint brought by the S.E.C. related to the same deal. But Judge Rakoff rejected that settlement. Calling the amount of money Citigroup had agreed to pay “pocket change” for the bank, he said the settlement deprived the public “of ever knowing the truth in a matter of obvious public importance.”

Juries are amazing. In my view, they usually get things right. Time will tell how many people listen to the advice from this jury that heard many details of the operations of the finance industry in connection with CDOs.

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