The Five Dumbest Things on Wall Street This Week

5. Dollar Menu

The Securities and Exchange Commission knows how to get some bang for its buck.

Check out this week's administrative order against a pair of former Salomon Smith Barney execs. John Hoffman and Kevin McCaffrey settled civil charges stemming from their failure to supervise disgraced former telecom analyst Jack Grubman at the Citigroup (C) unit.

Hoffman and McCaffrey each agreed to take 15 months off from the securities business, the SEC said Thursday, as well as to "pay civil penalties of $120,000 and disgorgement of $1.00."

That $1 figure looked a little odd to us, but it turns out the agency has its own reasons.

It's there, we're told, because of a quirk in Sarbanes-Oxley that allows the SEC to distribute fines to investors only if a case involves the so-called disgorgement of ill-gotten gains. For example, levying the $1 fines in this case enabled the SEC to disperse the $120,000 civil penalties to investors who lost their shirts in, say, WorldCom.

And as Institutional Shareholder Services' Securities Litigation Watch reported last year, the SEC has been ordering $1 disgorgements in big civil cases that otherwise wouldn't benefit injured shareholders.

"This one dollar of 'disgorgement' is the difference between investors receiving hundreds of millions of dollars a year from SEC enforcement actions or absolutely nothing," the publication noted, citing some high-profile cases that featured $1 disgorgement orders along with big civil penalties:

• Qwest (Q), $250 million.
  
• Bristol-Myers Squibb (BMY), $150 million.
  
• Royal Dutch (RD), $120 million.
  
• Symbol Technologies (SBL), $37 million.
  
• i2 Technologies (ITWH), $10 million.

"As a result of the combined five dollars of disgorgement in these five cases alone, the SEC will be able to distribute a total of $567 million to investors," Securities Litigation Watch concluded.

Complain all you want about Sarbanes-Oxley, but that doesn't sound like a bad deal to us.

To watch Colin's humorous take on the buy-sell back-and-forth at Acxiom, click here.

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