Eugene Grygo, Chief Content Editor, FTF News
The two major government regulators for U.S. markets, the SEC and CFTC, are reaching out via new videos that attempt to make what they do more relevant to mainstream investors, which would be many Americans. It’s encouraging that they are trying to humanize what they do although videos about potential audits and exams might make for more compelling presentations.
The CFTC Develops a Human Interest Angle
For human interest alone, the CFTC video offers the story of Bob Bauman, an individual investor and fraud victim, who was caught up in a silver trading scheme. In the video, Bauman sits down with Joe Konizeski, chief trial attorney at the CFTC, to discuss aspects of the case, which turned out to be an incredibly complex fraud. The perpetrators persuaded Bauman to hand over his retirement funds. In the video, Bauman and Konizeski chat in the restaurant where the fraud began. (The story behind the fraud would make a great mini-series like “Billions.”)
While Bauman did his own due diligence, he did not uncover any red flags. The firm in question worked through many third parties and even allowed Bauman to visit their offices in Florida. “And so I thought okay, but what I want to do this for is long term. I’m not looking to make a million bucks overnight,” Bauman says. The firm pushed for Bauman to buy into silver “on margin with leverage. … They would essentially loan me the money to buy a gigantic lot of silver.”
Essentially, the firm made promises that leverage was the way to go to make large investments via relatively low amounts of upfront capital. “When you purchase on leverage, it makes it a very, very risky investment,” Konizeski says.
Bauman did ask about the kinds of brakes the firm had in place and was assured that there were automatic stops to protect him. Ultimately, Bauman agreed to a transfer of $100,371.32. “I cleaned out my retirement account,” he says.
Sadly, instead of his retirement account yielding major returns, the firm ultimately wiped out Bauman’s investment. As luck would have it, though, the CFTC had been investigating the firm and its schemes, which had racked up 3,500 victims that lost more than $46 million dollars. The case turned out to be a major win for the regulator. (The video does not say whether Bauman got his money back via the process.)
Bauman’s story with more details is at https://www.smartcheck.gov/videos/ The regulator via the video makes a strong case that investors (and other market participants) should regularly use its SmartCheck service.
The SEC’s Corporate Video
In a completely different approach, the SEC in its video, “Straight Talk from the SEC,” features Jay Clayton, SEC Chairman, Rick Fleming, SEC investor advocate, and Stephanie Avakian, enforcement co-director, in a push to get investors to use the investor.gov service.
The video, although from the government, is very corporate and represents a radical change in style from the days of the prosecutorial Mary Jo White, the previous SEC chair. Her public appearances were heavily staged and allowed for only a controlled give-and-take with reporters, analysts and others. There were certainly no slick multi-media appeals to the average investor as the SEC was busy chasing down a plethora of crooks.
It will be extremely interesting to see if this change in style at the top will mean a more accessible and transparent SEC. This clear move away from the sheriff-on-a-misison days of Ms. White does not mention regulation and how it helps investors. And there are many signs that the Trump Team wants the SEC to aid the growth of the securities industry rather than crank out more rules.
See it for yourself. The SEC’s video with Clayton and the gang is at: https://www.youtube.com/watch?v=Q3aG_N65EfI
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