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The WSJ today notes that a 2003 party for a onetime major trader for Fidelity is the subject of a major NASD and SEC investigation. Given the descriptions and my experience with such outings (as an observer), it seems very plausible that illegal drugs and prostitutes were involved in a recreational fashion by some guests, but I somehow do not think this is a wise focus for our securities regulators. No doubt it is more interesting, especially to a young regulator, than the boring issues involved in actual fraud, but it suggests a lack of seriousness. Do they really think these are the most important things?

From the WSJ:
The fun included a stay at the ritzy Delano Hotel for some, a yacht cruise and entertainment by at least one dwarf hired for the occasion.
"Some people are just into lavish dwarf entertainment," says the 4-foot-2 Danny Black, a part-owner in Shortdwarf.com, an outfit that rents dwarfs for parties starting at $149 an hour.
Nothing says “party!” like several well-placed dwarfs, I guess. Too bad they outlawed the ever-popular drunken dwarf tossing in the 1990’s. In any case, this is the ultimate red herring. Given the feted bachelor was a star Fidelity trader and probably oversaw millions in commission allocations to Wall Street, is it any wonder he got tens of thousands of dollars in soft dollar benefits? How does this hurt widows and orphans?

There are many serious regulatory issues on wall Street, such as price manipulation by specialists on the listed exchanges (especially AMEX), or trying to nail the obvious cheaters who run prices up the day before a takeover is announced (why is it so hard to prosecute those guys?), modifying Sarbanes-Oxley to be less costly and more informative, expanding the list of companies that allow the ability to short on downticks. Instead, it’s Dwarfgate.