This edition of the Enforcement Highlights financial services enforcement movie reviews is a sequel to the initial set of reviews issued with the blog’s re-launch several months ago. Like any sequel, we are hopeful that it will be as well received as the original edition; like the Godfather Part II. Once again, we have selected several movies for coverage. We start with a discussion of a holiday movie controversy, take a deep dive into a holiday classic, and then turn to recommendations of non-holiday movies to watch over the holiday season.
Ab initio, we are applying the “Duck Test & and The Howey Test” as to what constitutes a Holiday Movie quoting Chairman Clayton in reference to ICOs (“You can call it a coin, but if it functions as a security, it is a security”) and James Whitcomb Riley (“When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck.”). Accordingly, we come down on the side that Die Hard, is a “holiday movie.” See link here for controversy as to movies not considered Holiday movies. Regarding its relationship to the financial industry, the plot revolves around Hans Gruber’s effort to steal hundreds of millions of dollars of bearer bonds kept in an office vault at Nakatomi Tower in Los Angeles, which in hindsight keeping a vault there was a bad idea and Nakatomi cannot take credit for John McClain as adequate internal controls (he was after all “just a fly in the ointment”). To conclude this holiday movie controversy, it follows that if it takes place within the holiday season, is shown on television repeatedly during the holiday season, and provides lessons for the holiday season, it is a holiday movie.
Now, let’s turn to an in-depth analysis of a well-recognized holiday classic that has been around almost 75 years. While it involves banking regulation enforcement, it provides important lessons regarding the need for strong supervision of personnel and controls over financial operational practices. We are of course talking about It’s a Wonderful Life. We all know well the villain of the story, Mr. Potter, who the American Film Institute recognized as #6 on its top 50 villain list of all time. However, another potential antagonist lurks in the shadows ready to pounce until the very end of the film – the Bank Examiner from Elmira, New York. What triggers the Bank Examiner’s scrutiny of George Bailey’s business practices is the lack of sufficient supervision and controls at the Bailey Bros. Building & Loan Association. George Bailey allowing Uncle Billy to be in charge of making the critical deposits for this financial institution by relying on the use of his tying a string around a finger method reflects a lack of supervision and a breakdown in controls. The “wonderful old Building and Loan” would have been much better off if George had tasked Cousin Tilly or Cousin Eustace to make the deposits and then supervised them appropriately. Now, if only crowdfunding, as displayed at the end of the movie when the neighbors pass the hat, were an acceptable and tax-neutral means for paying a regulatory fine or disgorgement, that would truly be wonderful!
Having said all that, we recommend four additional movies for holiday viewing, which is NOT to say they are holiday movies.
- Boiler Room
- The Big Short
- Margin Call
- Rogue Trader
- The Wizard of Lies
Boiler Room is routinely ranked as one of the top movies of this genre, despite being underrated by the general public. It provides an inside look at the pump and dump fraudulent scheme model. Further, it may be Vin Diesel’s best acting job, especially in comparison to the multitude of Fast and Furious movies that make up most of his film credits. The Big Short and Margin Call are two of the best movies regarding the build up to and the initial fallout from the Great Recession of 2008. The Big Short, based on Michael Lewis’ book and with a cast that includes Christian Bale, Steve Carrell, Ryan Gosling, and Brad Pitt, follows a group of savvy fund managers as they become aware of the impending housing bubble that served as one of the triggers of the financial crisis. Fast forward, and Margin Call, with Demi Moore in one of her best roles, takes place over 24 frenetic hours and covers the waning life of a Wall Street firm on the brink of disaster because of the toxic nature of the complex derivative instruments it is left holding. Rogue Trader tells the real-life story of Nick Leeson. A young Ewan McGregor flashes early acting brilliance as the trader who single-handedly caused the insolvency of Barings Bank. Finally, and speaking of rogues, several films and made-for-television movies have attempted to cover the wickedness of Bernie Madoff. While most of these efforts have been mediocre, we believe that The Wizard of Lies leads the pack, in large part due to the work of Robert DeNiro and Michelle Pfeiffer as Mr. and Mrs. Madoff.
Depending on where you live, going to the movies is either impermissible or limited, and many remain uncomfortable doing so. With these limited movie going options and winter upon us, we recommend streaming one of these movies for a few hours of escape. For additional recommendations, please see our original movie review post.
Happy Holidays and all the best in 2021, from Enforcement Highlights.