The easiest way would be for the SEC to get involved. They can bar people from being officers of public companies. Of course, it would be a major abuse of power and certainly unconstitutional.
this is impossibly naive. Of course it's illegal to lie to shareholders, but guaranteed 100% of publicly traded companies do.
What's the SEC going to do? They are in furloughs right now and have no budget to go after anyone. Looking further ahead, if a company has enough money, they can buy off the SEC by getting laws passed that will let the do whatever they want.
I think allowing the SEC to "jail" a company - to prevent it from conducting any business or processing any funds for some period of time - would be apt.
The SEC should be investigating things like this, and do actually bring a lot of enforcement action against various companies and individuals, but I suspect it might be a career-limiting move to target a politician for all but the most gross of abuses.
By setting up an antagonistic system, I think. A system of checks and balances in which the interests of the employees of the SEC are OPPOSED to the interests of the banks.
For example, if the SEC successfully fines JP Morgan a sum of $2 billion, let the key employees of that prosecution them keep $500 million and distribute it among themselves. That way the employees of the SEC have an incentive to be antagonistic to banks.
Here's a downside I see: Suppose I want to place a short position on a fraudulent company, and then loudly announce that I've uncovered signs of fraud in it. A pretty standard procedure, right? Saving people's money from a con artist and making some money in the process.
Now suppose the CEO of the company golfs with a SEC commissioner. Or there's some other relationship, a less direct one. No matter how strong the ethical rules of the SEC are, they can't ban every potential relation between a commissioner/employee and someone from a public corporation.
Suddenly the fraudulent company would know precisely what it needs to do (in terms of manipulating it's own stock price) to force me to close my position.
Then the awful rules can be challenged in a court of law, which will act as the limiting power on the SEC. There does exist a mechanism for challenging malicious prosecution in our legal system, and if the corporations feel they are victimized, they can use it.
The point, however, is without antagonistic checks and balances in place, you will always run into the "revolving door" problem.
The SEC doesn't actually have the power to do that - the US law does. The SEC can only guide on what it thinks the law says. A court is the way to determine what the law says.
[Obviously the SEC can recommend changes to the law, and if it loses this case it might well do]
Well, the biggest roadblock to that would be securities laws and their enforcement agencies. I doubt the SEC and its analogues in other nations would just sit and watch that happen.
Maybe a black-market "corporation" like a drug-smuggling ring could try something like that, but even they would have reservations.
But then you have conflict of interest if you're asking SEC employees to investigate companies they hold stock in. The incentive would be to not investigate or impose milder penalties.
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