valukas says the s.e.c. g less than truthful when it said that it had enough assets to survive the crisis. but that and other damaging information was never disclosed to investors who continued to pump billions of dollars into the firm. >> should it have been disclosed? >> absolutely. >> isn't the government, the s.e.c. in this case, the people who were supposed to protect the investors... >> yes. >> aren't they charged with informing investors? >> yes. >> why didn't they do it? >> they may not have had the expertise necessary to understand the material they were receiving. they were getting the material. whether they understood it is another question. >> the very fact that government regulators were inside the company with access to its books and records would complicate any prosecution of lehman officials. until january 2012, david kotz was the s.e.c.'s inspector general. over the previous four years, he'd issued more than 100 reports about major deficiencies in the way the s.e.c. did its job. if the s.e.c.

the act passed the s.e.c. through the mandate to create unprecedented new disclosure rules but not to reform money market mutual funds which we were later told are ticking time bonds of systemic risk. dodd-frank addresses extractive resource pames made by u.s.-hied oil, gas, and mining companies but leaves the risk of freddie mac and fannie mae for another day. the act fundamentally -- fundamentally restructures the infrastructure by establishing the financial oversight council and the consumer protection commission but fails to have the f.c. -- ftc and cftc share jurisdiction over similar markets. they create founding as for sifi's but does not address the short come offings the short-term funding model of banks that continue to be too big to fail. the dodd-frank act attempts to solve the financial crisis, illustrates the peril of false narratives. it justifies its mandates as answers but only after asking the wrong questions. i suppose this shouldn't be a surprise given that the statute was not a product of b

then robert khuzami, a former federal prosecutor, took over the s.e.c.'forcement decision division. >> the results from the enforcement division alone the last three years have been the three highest number of enforcement cases we've ever brought. >> reporter: including 180 insider trading cases involving 430 defendants and nearly $900 million in illegal profits. what's been the most important case, in your view? >> that would probably have to be the galleon cases for the simple reasons it really focused on kind of insider trading as ad about businessmodel. >> reporter: in 2011, the head of the galleon group investment fund, raj rajaratnam, was convicted of paying for confidential information and leading the biggest insider trading scheme ever. now serving 11 years in prison, raj rajaratnam was fined $92 million, and that case has led to charges against 59 other defendants. the increase in insider trading cases is directly the result of what? >> there are many, many, many hedge funds all chasing the same level of return, and in order to distinguish yourse

remedies has been the problem of the s.e.c. they say pay us a little money and we go away. that's not enough. and three, the rule-making capacity. and i don't just mean rules about how they issue their proxy statements. i mean rules that empower shareholders to finally run the companies on the behalf of shareholders, not on behalf of the ceos. those are the three different metrics i'm looking for. >> two questions about her which i think you know the answer to. one is her organizational capacity. >> right. >> it's not that she is out there, arguing, litigating every single case out of the s.e.c. you need to be able to run the agency. >> right. >> two, her understanding of the implications, the moral implications and legal implications of complex financial doings. is she capable over doing it? >> look, she is as smart as you will find anybody to be. she understands all of this. i've been on panels with her. we have sometimes jousted with remedies because she was still representing these guys. but she gets it. and i think if she t

harvey pitt, former chairman of the s.e.c., a disaster. e in and said i want the kinder, gentler s.e.c. he destroyed the place. mary jo has the capacity to step up to the plate and show us that she can turn that broken agency around. here interest three metrics that i think we judge her by. one, what cases does she bring and bring quickly? use the clayton documents which showed the knowledge within the banks of the corruption of what they were doing about the underlying mortgages, use those documents to make structural cases. two, seek remedies that go way beyond money. reorganize the banks and is the way they do business. remedies has been the problem of the s.e.c., even when they prove guilt, they say pass a little money and we go away. that's not enough. and three, the rule-making capacity. and i don't just mean rules about how they issue their proxy statements. i mean rules that empower shareholders to finally run the companies on the behalf of shareholders, not on behalf of the ceos. those are the three different metrics i'm looking fo

the s.e.c. played a critical role in protecting our financial system during the worst of the financial crisis but there's much more work to be done to complete the task of reforming wall street and making sure that american investors are better informed and better protected going forward. >> reporter: for last 10 years, white has been in private practice defending some of the world's biggest banks against s.e.c. charges. now, historically, these big banks have delayed or eevade rad s.e.c regulations through better lawyer. in white, these big banks may meet their match. >> pelley: major, thank you. well, a lot of wall street's big names are in switzerland for the world economic forum this week, and that's where we find anthony mason. anthony, what are they saying about the nomination of mary jo white? >> reporter: well, scott, the thing you have to remember here is the s.e.c. was a laughingstock when it missed the bernie madoff ponzi scheme, and it spent the last three years trying to restore its

he did say the s.e.c. is very cognizant of multi-level marketing companies. >> he said cognizant of multi-level marketing schemes, okay, or scams i think is the term that he used. it seems to be he's predisposed to perhaps to think there could be an issue here by using that language. >> the s.e.c. closed down a zek reward or zoom reward or whatever. it's the purview of the federal trade commission to determine if the model is what it is. >> i'll get the traders involved. i can't remember a battle ground this public between two hedge fund guys to have gone out their way to take different sides of the issue. yesterday when loeb comes out, he calls ackman out without mentioning his name. he said the short seller. what do you make of this saga? >> i don't know how this differs from an avon or tupperware that are the same type of selling. >> whoa, whoa, whoa. stop. tupperware is a party plan. it can show you the real sale of a product. there's scale here, i have a qa, this big presentation i have online, a qa wi

the s.e.c. says that doesn't seem to be happening. ore they go in, but this whole issue of the money and $50,000 for a tip, $50,000 for all of that trouble, that's something that davidk katz says is an issue an they will be looking at that going forward. >> netflix gained in the last quarter. we'll be talking some nfl x. ♪ x. [ watch ticking ] [ engine revs ] come in. ♪ got the coffee. that was fast. we're outta here. ♪ [ engine revs ] ♪ >>> netflix has seen a steady rise over the past few months but what can investors expect tonight from the streaming subscriber number? julie is live with more on that. >> the big question is how fast it can grow streaming subscribers to offset growing content costs. shares are trading higher ahead of this afternoon's earnings announcement. they're up more than 3.5%. the number to watch is netflix's domestic streaming subscribers. analysts expect 27 million in the fourth quarter and 28 million in the first quarter of 2013. and wall street is projecting netflix to swing to a loss of 13 cents per share a

we don't know why the s.e.c. was interesting because he said, look, the only thing i can do is not bring a deal to berkshire. the flip side of it might be the only thing you can do is bring the deal to berkshire and not invest your family money. >> it would have been so easy once he saw that maybe they were going to do something he could have sold his entire stake and said i recuse myself. once i went and asked warren to look at the whole company, i could have sold the entire stake. anyway it paid off for him. i forget how many -- >> it was not -- >> he did say in that interview, eventually, when we ask them several times, don't you wish in hindsight wish you had done anything differently? he said yeah, in hindsight i wish i had. >> it's $3 million or $4 million profit. >> but trust me that was not -- >> a guy like you it's not a lot but to some people that would be a lot of money to make on one trade. three or four million dollars? not to bob doll. >> a lot of people who would not give their career and their rep

because their investors are buying say agricultural futures but a few two weeks ago three weeks ago the s.e.c. not the commodities futures trading commission but the securities and exchange commission approved they essentially legalized hoarding. in the form of a controversial fund designed by j.p. morgan chase that for the first time will lead investors buy shares backed by physical warehouse copper to use as a form of investment well you know it's interesting to use the word hoarding who are nervous because according to economists in america and the obama administration saving is a bad thing because of somebody one person savings is another person's loss of spending and that we need people to just spend spend spend and warning is bad and yet the f.c.c. has given the green light to wall street to hoard vital commodities why why is wall street interested now hoarding vital commodities is the day of the pawn paper apocalypse upon us yes it is the day of the three hundred year high bull run in bonds upon us with a magnificent spectacular burst and bond prices yes that's baked into the cake for

the s.e.c. enough paper to fill 250,000 boxes. that's enough to fill the capitol rotunda after just a few months. they tell us in one year the agency receives about 30,000 tips and complaints. we asked bruce carpati if all the tips get taken seriously. you know, bruce, a lot of people will say i contacted the s.e.c. i tried to alert them. i thought something was happening. i didn't hear back. nothing was ever done. >> at the s.e.c. we have a very dedicated wrkforce whose number one priority is investor protection. when i get a call, when others get a call, we take those tips seriously. now in terms of the methods we use, you may not hear from us, because we're actively investigating those matters. so the fact that somebody goes on the website, sends in a tip, thinks that that tip is not being investigated, you want them to know that's not the case. >> right. our investigations are nonpublic. they're confidential investigations. the fact is, is when we're alerted to those we get together and say,

you don't want to mess with mary jo. >> reporter: the s.e.c. has struggled to rebuild it's reputation and stature following the madoff scandal and the financial crisis and white signaled she would be an active reformer. >> the s.e.c., long a vital and positive force for the markets has a lot of hard and important work ahead of it. i would welcome the opportunity to lead those efforts. >> reporter: the president says white isn't easily intimidated, a requirement for the job facing the s.e.c. >> we need to keep going after irresponsible behavior in the financial industry so that taxpayers don't pay the price. >> reporter: the president wants to keep another cop on the financial beat. senate republicans blocked a vote on richard cordray's nomination to be the first head of the consumer financial protection bureau. the president appointed him anyway, but that term ends this year and obama wants the senate to act this time. >> financial institutions have plenty of lobbyists looking out for their interests. the american people need richard to keep sta

you don't want to mess with mary jo. >> reporter: the s.e.c. has struggled to rebuild it's reputation and stature following the madoff scandal and the financial crisis and white signaled she would be an active reformer. >> the s.e.c., long a vital and positive force for the markets has a lot of hard and important work ahead of it. i would welcome the opportunity to lead those efforts. >> reporter: the president says white isn't easily intimidated, a requirement for the job facing the s.e.c. >> we need to keep going after irresponsible behavior in the financial industry so that taxpayers don't pay the price. >> reporter: the president wants to keep another cop on the financial beat. senate republicans blocked a vote on richard cordray's nomination to be the first head of the consumer financial protection bureau. the president appointed him anyway, but that term ends this year and obama wants the senate to act this time. >> financial institutions have plenty of lobbyists looking out for their interests. the american people need richard to keep sta

market until blights masters thinking of late of course now again and finally on this story max the s.e.c. in their statement when they looked at the london metals exchange where the alameda where j.p. morgan will be storing this thirty percent of the global copper supplies they said that they don't see thirty percent of the supplies being taken off market will affect prices so here's the s.e.c. openly saying there is no such thing as supply and demand in the price covering mechanism it's not really about the control of the physical stocks of commodities including copper so much as the impending collapse in global bonds and the and the return of hyperinflation that's really the big. the story here j.p. morgan wants to be hedged against all the damage that they've created these past ten years because as the u.s. treasury and u.k. treasury market collapses fifty sixty seventy percent and you have five six seven million people in britain suddenly homeless they want to have the price of all the commodities like copper go fifty sixty seventy percent doesn't mean the demand for those commoditie

we spoke with sean egan when the s.e.c. first levied these charges last april. the agency, sean, isn't calling into question your ratings. instead, it's talking about your application itself. what about the information on that application? >> that is the issue, and, according to the s.e.c., we think it's a paperwork issue that we... i was responsible for filling out that form. i filled it out in accordance with our lawyers' guidance. they said, "fill it out as honestly and accurately as possible," and i did. if i had to fill it out again today, i would do exactly the same thing. >> susie: it will be interesting if he really thinks that today in january. unfortunately, egan was not available for comment tonight. >> tom: we have an invitation to him, however, on this first trading day on this shortened trading day. stocks began the shortened trading week by adding to recent gains. the s&p 500 didn't manage to pull itself into positive territory until the early afternoon as traders and investors digested the morning earnings. the afternoon rally pushed the index up

dow jones reporting that the s.e.c. has opened an inquiry into herbal life. d the multi-level marketing industry boils down to this. do participants make more money from recruiting others than selling product? now, during our ten-month investigation into the industry we interviewed many current and former distributors including sharon shea who lost $15,000 in three months after signing up to sell herbalife. so you basically sign these people up. this is great. now you're signing people up. you're getting a cut of their business. you must be off and running, and you must be -- >> oh, i've got checks coming in daily. no, not happening. >> but you have these downline people. you must be getting money kicked up to you upline now. >> well, they are having the same problem i was. signing people up. you don't make money from selling products. you make a little, not much. not enough to pay the bills that are racking up. you make money from signing people up. >> reporter: and former distributor dan fallow who claims at one point so to-to-have been one of the biggest di

plus, the s.e.c. y equipped to handle all of the data that pours in every day? we'll go inside the s.e.c. to find out. the top performing hedge fund in 2012 bet on housing. metacapital's deepak narula will be here to tell us how he did it and why he's about to make the same bet again. and next flix's ceo speaks out. find out what he has to say about the quickster debacle, what he has to say going forward and a lot more. we'll start with am. the stock down after the company reports a disappointing first quarter. jeffrey now downgrading the stock from buy to hold, cutting its target from 800 to 500. peter misek is managing director. he joins us on the newsline. good to talk to you. >> good morning. thanks for having me. >> sell side getting pillared after making the call. do you feel like a lemming or not? >> you know, we have the data in december. we should have downgraded it then. we're disappointed in ourselves and i think we'll beat ourselves up much harder than anyone else could. we are disappointed

i don't think the s.e.c.find anything that can be referred to justice for criminal prosecution. so my view is that ackman has a very weak ally, weak partner in the government. even cnbc's own herb greenberg, in a fabulous documentary that you can see online, sellingthedream.cnbc.com, has raised legitimate and i think frankly troubling questions about herbalife's business practices. but loeb has powerful allies and they are real. carl icahn has taken a stake in herbalife, and so company the state of play. akman has a fickle, potential ally in some entity of the government not nearly as motivated as he is to take action against herbalife. and loeb has carl icahn. someone with plenty of capital to buy more herbalife if it suits him. that's all well and good. a battle royale between rich people over herbalife. here are the fundamentals, that's where i come in, right? herbalife is making a ton of money making supplements, particularly overseas, and the ceo has done an amazing job of making distributions arm in sou

. >> reporter: in an interview just before she left as chair of the s.e.c., mary shapiro told abc newsfeel safe from the reach of american law. >> they see themselves as far away geographically. >> reporter: and she revealed the chinese officials rejected pleas she made last year in b beijing for help in tracking down the scammers. you don't have the help you need. >> not right now. >> reporter: the b-- >> there is no recourse. >> he says he and his wife lost much of their retirement money, about $60,000, in the stock of a chinese coal company, puda coal, traded in the new york stock exchange that u.s. authorities say had no coal mine. >> i'm not a big guy or a rich guy. it was tough for us. >> reporter: the puda coal chairman has been living it up ever since with the money officials say he stole. when abc news went to the headquarters of puda coal in china, we were told the chairman had not been seen for months and that no one at the office knew his whereabouts. >> do you know when he'll be back? >> that's amazing. that's amazing. how can he not at least be under some prosecution for

. -- the fear of the s.e.c. inancial crisis and the frauds that we saw in 2009 we instituted a number of reforms. one in particular, the introduction of the industry experts. they know where the bodies are buried. for example, we have a former hedge fund portfolio manager. we have a former private equity analyst. these people can go into testimony, they can ask the right questions and assist our investigative teams in the ways we didn't have historically. >> there's a thought out there that the type of lawyers that come to work here in this building that they choose to do this type of service because they can't get the high-paying jobs on the other side of the street, so to speak. >> that's a fallacy. >> now the s.e.c. enforcement division had brought more than 1,400 enforcement actions in the last two years. karpati said they have hired highly trained wall streeters. we asked karpati what they're doing to keep up. >> can you give us an example of how the new technology led you to an enforcement action in the sen

how about the s.e.c.? the s.e.c. has been incredibly dominant, too. they've now won seven straight titles. is this the type of thing that can go on indefinitely, or will the bcs playoffs, which will finally come into play, could that change things? >> reporter: i actually think it's going to help the s.e.c. because if you're talking about more chances for more s.e.c. teams to get into the national championship picture, if you will, you know, with an expanded playoff system going to four games after next year's national championship game. so i don't see the s.e.c.'s domination dying down any time soon. when you're talking about how much more dominant the s.e.c. is, people are talking about the championship game really happening in december when it was georgia against alabama in the s.e.c. championship game in atlanta. that's how dominant that conference really is. >> i think that's absolutely right, carlos. now, it was so one-sided last night, you almost had to look for other things for entertainment. the broadcast actually provided some sideshows ther

as does the s.e.c. and fbi that work on these matters. ey're as smart as you can get in this country. we can always use more, but i think people are spending the time and dedicating their time to get the job done. >> what pockets of financial services have you found to be the most aggressive. people talk about hedge funds being very aggressive and we all know there's the wagons circling around steve cohen. can you tell me about that case? >> i don't talk about particular cases ever. >> okay. in terms of the areas of financial services in which you -- that skirt the line, if you will. can you name areas that you think are more aggressive than others? >> there's nothing wrong with being aggressive. the problem is when people think that they can get as close to the line as possible and they aspire to the minimum, just staying over the line. there are too many people who get the wrong message and then cross the line. a lot of times they gallop over the line. and that's where we come in. part of the disheartening thing of the insider tradingase

the s.e.c. ke on her? >> i don't know mary jo personally. but i know her by reputation. her reputation is outstanding. she's going to come in at a very important time. there are lots of issues that have to be dead with immediately. we've enjoyed a close working relationship with chris cox and mary shapiro. >> the regulation has gotten harder for financial services. what's your take on the regulatory environment. it seems the financial services over the last couple of decades has been riding a wave of positives. deregulation, globalization. going forward economies are looking inward and regulation is only getting tougher. >> a lot of those customers you're talking about are our biggest customers, a lot of those financial institutions. as long as they are going to be facing a head wind like that, you see a cut on volume, too. they have fewer strategies they're carrying out because of all the capital charges. what i heard yesterday that i think is the biggest issue is not the breadth of the regulati