Sunday, May 21, 2006

Eeks! It is alive!

The SEC is not dead, despite its seeming inability to do much to help investors. It has finally started taking action on the massive options backdating that has been going on, unless you believe in some supernatural ability to time options grants, for a long time now.

Over the past few weeks, Juniper, Affiliated Computer Services, RSA Security, Safenet, Comverse, Vitesse, United Health, Caremark, Jabil Circuit, Brooks Automation, American Tower have been named by the SEC. Stocks in these companies have taken big hits, and many like Juniper (JNPR) and Safenet (SFNT) have become very attractive as takeover targets.

But more importantly, like with past such suits, the executives in the worst case will be fired, with a generous exit compensation. They are unlikely to see the walls of a prison, which is unfortunate. The options backdating is just another example of extreme greed, which starts with excessive options going to a selected few, who also then routinely grant themselves more, via a nodding board, and ends with disgraceful salaries/exit packages. Looting on this scale, from investors/customers/employees, makes the Huns and Barbarians look decent.

While the SEC temporarily has insomnia, it should also consider banning filings on Fridays and last working days before long weekends, as these seem to be the preferred times for companies to file details that they don't want the press or investors to pick up. Wonder what kind of filings will we find for the coming Friday, May 26th!

Will ordinary investors get anything out of the current bout of activity from the SEC ? Unlikely, going by past experience. A few suits and some settlements without admitting any wrongdoing, and pretty soon we will be back to the good old days of pillage.


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