The Real Deal: Securities Fraud & Regulation

Finance , Gabelli100 | Sep 19, 2022 | Gabelli School of Business

When the health technology company Theranos announced the introduction of an automated blood-testing device that could run multiple tests at once and make testing more affordable and accessible to consumers, it amassed millions of dollars from investors, spiking the company’s valuation to $10 billion. However, the testing capabilities turned out to be completely fabricated, exposing one of the most notorious securities fraud cases in recent history.

Past scandals and regulation are the focus of UCLA Law Professor James Park’s forthcoming book, The Valuation Treadmill: How Securities Fraud Threatens the Integrity of Public Companies, and this webinar co-sponsored by the CFA Society New York, the Gabelli Center for Global Security Analysis, and the Museum of American Finance. Park examined infamous cases that involved household names, including Xerox, Apple, and Enron. He also suggested that while the 2002 Sarbanes-Oxley Act was an important step toward mitigating fraud, additional regulations from the U.S. Securities and Exchange Commission could better protect investors.

“We need well-thought-out regulations and we need to be careful about over-regulating at the same time,” Park said. “It’s the job of investors to look for fraud and look for suspicious companies and call them out, but they’re not always able to find the more subtle frauds. We’re always surprised.”