Senator Grassley's suggestion of a two-year ban on SEC employees representing clients before their former employer got watered down in the final Dodd-Frank financial regulation bill to a mere requirement (Section 968) that the Government Accountability Office conduct a "study on SEC revolving door" that will
(1) to review the number of employees who leave the Securities and Exchange Commission to work for financial institutions regulated by such Commission;
(2) determine how many employees who leave the Securities and Exchange Commission worked on cases that involved financial institutions regulated by such Commission;
(3) review the length of time employees work for the Securities and Exchange Commission before leaving to be employed by financial institutions regulated by such Commission...
(6) determine if the volume of employees of the Securities and Exchange Commission who are later employed by financial institutions has led to inefficiencies in enforcement.
The topic came to mind this morning when I read in the Wall Street Journal an article under the headline "SEC Goes After Fraud By Local Hedge Funds":
The manager, Neil Godbole, settled the suit without admitting or denying the charges, paid a $40,000 penalty and agreed to be barred from association with any investment adviser for five years.
"Neil cooperated fully and voluntarily with the SEC's inquiry and he's glad that he's resolved the SEC matter," said his lawyer, Jahan Raissi.
The Journal doesn't say, but Mr. Raissi's Web site does: "Mr. Raissi is a partner of the firm and co-chair of the firm's Securities Enforcement Defense Group. Before joining the firm, Mr. Raissi was a Senior Counsel in the Division of Enforcement of the Securities and Exchange Commission in Washington, D.C."
A couple of days earlier, a Journal article about Steven Rattner's dealings with the SEC and with the New York attorney general, Andrew Cuomo, made reference to "a phone call between Rattner's lawyer, Bill McLucas..." Again, the Journal article doesn't mention it, but Mr. McLucas's Web page at WilmerHale does: "William McLucas is the chair of the firm's Securities Department, and a member of the Securities Litigation and Enforcement Practice Group. He joined the firm in 1998. In 1977, Mr. McLucas joined the Securities and Exchange Commission's Division of Enforcement. He served under five successive Chairmen of the SEC while he rose through the Division, ultimately to serve as Director of Enforcement for eight years—longer than any other Enforcement Division Director in Commission history."
I'm all for government officials finding productive work in the private sector, and one of FutureOfCapitalism LLC's own favorite lawyers (for corporate work, nothing enforcement related, don't worry) is a former SEC official. So I don't want to be misinterpreted here as being overly critical. Even so, it's hard to escape a kind of chuckle at the assignment to "determine if the volume of employees of the Securities and Exchange Commission who are later employed by financial institutions has led to inefficiencies in enforcement." Inefficiencies for whom? For the employees themselves, it's tremendously efficient — launch investigations and burden companies with regulations, thereby encouraging the companies to hire your former colleagues, who eventually may hire you, too.