Insight: PFGBest regulator known for inexperienced auditors By Sarah N. Lynch and Ann Saphir WASHINGTON/CHICAGO | Sat Jul 14, 2012 2:09am BST (Reuters) - The watchdog that missed for nearly two decades the blatant fraud at failed brokerage PFGBest has frequently sent out fresh college graduates to look over the books of complex financial firms, people familiar with its operations say. The regulator, which oversees mostly smaller, independent futures operations, has little turnover at the top, and an army of young auditors with a lack of real-world work experience before they come to the NFA. "There is a gap between the soldiers and the senior officers," said Mark Ruddy, an attorney in private practice in Washington, D.C. who worked for the NFA in the mid-1990s. "The soldiers are fresh out of school with a check list, and they follow the check list." One NFA employee lists on her LinkedIn profile interning at furniture manufacturer Allsteel and working at an Iowa bookstore as her only work experience before the NFA hired her as an auditor in 2008. Another NFA auditor's job before being hired in June 2011 was as a pricing intern for Walt Disney World according to his LinkedIn page. An NFA spokesman declined to comment on the age or experience of its auditors. http://uk.reuters.com/article/2012/...120714?feedType=RSS&feedName=GCA-GoogleNewsUK
Sheep A, "Well, I don't understand this but I'm pretty sure it's legit. If I ask questions I will look dumb. So forget that plan. I'll just nod my head and check off these boxes." Sheep B, "This looks, well, hmmmm, well I just got this job and I don't want to speak up." Sheep C, "Hello, Yes Sir, Yes Sir, Yes Sir......" Sheep D, "zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz" Sheep E, "Do we get a free lunch? Sweet, let's go"
Like I have said, this set up system was designed to fail and there is a bigger agenda in these financial firms being allowed to destroy themselves from within. The structure of regulations put in place and lack of real oversight is not an accident imo. I think we will have more brokerage failures in the next year or two before anything really changes. The changes will not necessarily be good either, but a shift into another broken system dirrection.
Maybe it's just the unmotivated public sector vs the highly motivated and very deregulated private sector. The head gazook at PFG was just pulling the most simplest of frauds and all the auditors that are trained to look through complicated stuff didn't suspect him.... or maybe part of his $200 Million went to payoffs! Will we ever know? Maybe some investigative journalist [like we have any of those] will see if the spending levels of the senior level regulators are out of line with their incomes... I wouldn't hold my breath waiting for a public sector employee to look into that.
What exactly is the point here? A company hires college graduates? The same can be said for any public accounting firm, bank, fortune 500 company. Are companies not supposed to hire graduates and if they do hire graduates how are they supposed to train them other than on the job? Is the solution to hire accountants with 10 years of experience from public accounting firms? Great, you will have to pay those individuals 2-3x what you are paying the minions and then everyone will complain about why there fees are going up. On a dollar basis this fraud pales into comparison to the losses incurred by mutliple incidents at large banks over the past 24-36 months where simply risk measures were breached and evaded. Incompetence and laziness exists everywhere.
You don't give those fresh noobs a big job like that. Start them out with simpler jobs under the oversight of seasoned experienced auditors. i.e.: something like in the trades where you have journeymen working under skilled tradesmen until they are ready. The problem is people want to pinch pennies. How would you like your surgeon to be fresh out of college with no hands on experience?
shiphouse has been an apologist for the NFA since this whole fiasco started. NFA should be investigated by federal authorities to see if there were any attempts at collusion,negligence or dereliction of duty and face criminal prosecution if necessary.
Things that are being said are true in any business. The last guy said, how would you like a fresh surgeon out of school? That's what happens everywhere, it's July new crops of residences will be starting at hospitals all over the country turning minor surgeries into deaths. You either have an economic system that employs young people and empowers them or you have a large bureaucracy (cough' cough communism) where you work at the same job for 30 years but have a terribly unproductive society. I am sure it was very junior people at jpm that clearly missed risk signs or were coerced into pushing them under the rug, should young graduates not work at banks either? At the end of the day it was not only the nfa that missed this, it was every cta and cpo that should have also been doing there own due diligence, it was senior employees in the firm that should have questioned why they did not have access to the main bank account and it was also us bank, who has an obligation to understand the customers they do business with. As soon as Pfg was censured and then subsequently sued by the state of Minnesota in connection that states second largest ponzi scheme, us banks internal bells should have been going off. What is the solution? I said it before it's, simple, not dual but three cash signatories for any business in us that handles customer cash and in the case of fcm's daily cash reporting requirements by both the fcm and the custodian bank, add a third layer which is sub accounts for each customer in which they have access. Will this be cheap? No, can it be done? Yes, would it solve the problem? Most likely.
I'm switching to equities....it seems that trading in an account that isn't SIPC insured is too risky these days.