Mystery Risk

One of the things I learned from the SEC Office of Inspector General report on Bear Stearns is that way back in 1990, Congress gave the SEC the authority to police the risks taken by broker-dealers. The power was granted by the Market Reform Act of 1990 (PL 101-432).

In response, the SEC's Division of Trading and Markets promulgated rules 17h-1T and 17h-2T (57 FR 32159-01). The capital "T" stands for temporary. These rules, adopted in September of 1992 and fully effective at the end of the year, were never revisited and never made permanent. The OIG Report is very critical of Trading and Markets' decision to never finalize 17h-1T and 2T. The temporary rules require broker-dealers to file form 17-H, Risk Assessment Report for Brokers and Dealers.

I tried to find a filed form 17-H, but discovered that they are confidential (it was in the rule, but I didn't read carefully enough). So, I asked my friends at Westlaw Business to start a FOIA request to see if they could lay hands on a couple. Did you know that WB did FOIA requests? If I manage to get one, I imagine I'll still need someone to translate it for me.

In other Bear Stearns report news, Race to the Bottom has a post about the wealth of information about the SEC investigative process the report contains.