As discussed in Part I, the primary defense to preventing securities fraud is has been to “bar” the person from the industry and to instruct the criminal to stop committing fraud. Despite the evidence that the slap on wrist approach has been ineffective, some lawmakers continue to think barring individuals and educating the public is the best way to stop securities fraud.
Yet, according to Futures Magazine, during the hearing Sens. Susan Collins (R-ME) and Bill Nelson (D-FL) stressed the importance of “consumer education” to prevent future scams. If only we could convince senior citizens to spend their golden years reading CFTC and SEC news releases and memorize the names of hundreds of barred fraudsters each year maybe we can turn the tide in this fight – right. Great game plan. At least Sen. Claire McCaskill (D-MO) understood the disservice the education alone approach would provide the investing public by stating that “The first line of defense is not consumer education,” but rather “putting the crooks in prison.”
The hearing also featured testimony of a former fraudster, Karl Spicer. Spicer was convicted for ripping off investors in a metals scam. Spicer’s testimony also clearly stated that it is government agencies failure to instill fear into fraudsters that has resulted in no progress in investor protection. Without real world consequences, criminals merely go from scam to scam and will unapologetically continue to swindle. Spicer stated that “With all due respect to the civil authorities, the people that I have encountered…don’t really respect the civil authority bans.” In fact, “The gentleman I was with had a CFTC ban, he cooperated; he had a ban and he still went about doing business the very next day.”