Notably, the firm was not charged with any violation of Section 10 of the Exchange Act. It was charged only with failing to have appropriate procedures for handling material nonpublic information ("MNPI"). Additionally, the SEC's order against the firm suggested that any use of MNPI, however acquired, is improper. But this is not the law. It is only improper to use MNPI if one comes by the information in a situation in which one has a duty not to use it, or has acquired it improperly. Here,…

From time to time, banks and their employees violate the law and are punished for it appropriately. In that respect, banks are no different from companies in other industries or the government itself. The government's job is to (i) make good laws and (ii) go after those institutions and individuals that break those laws.

The notion that the government is able or should attempt to be an arbiter of "culture" seems dubious. Despite that vagary, the New York Fed . Illustrating the…

Central clearing has an obvious benefit in securities markets as compared to swaps markets: in securities markets, there is an object to be delivered, and having a central clearing repository can reduce the risk of failure because it allows for the set-off of delivery obligations. That advantage does not exist in swaps (or other notional) markets, as there is nothing to be delivered. Central clearing works best (in fact, it only works) in markets where the underlying security is extremely…

Some Governors of the FRB have strongly criticized H.R. 3189. While the attention that the bill has received largely focuses on the constraints the bill would put on the FRB's power to set interest rates, perhaps the more interesting section of the bill deals with the FRB's regulatory authority. It is not obvious why the FRB when acting as a regulator should be subject to lower standards than other financial regulators. In addition, the FRB should be in a better position than any regulator…