As part of a settlement with the SEC last month, Citigroup (NYSE: C) promised it would never again, as The New York Times put it, "violate one of the main antifraud provisions of the nation's securities laws." That seems like a noble aim, and we'd love to believe that Citigroup means what it says.

Unfortunately, Citigroup made a similar pledge in July 2010, according to the Times. Oh, wait, and there were other agreements in May 2006, March 2005, and April 2000. When it comes to financial fraud, it seems, you can have five strikes, and still be up at the plate.

And Citi isn't the only one. According to the Times' study, during the last 15 years, there were "at least 51 cases in which 19 Wall Street firms had broken antifraud laws they had agreed never to breach." Here is a complete list of 16 of those companies that declined to comment on the findings:

American International Group (NYSE: AIG)
Ameriprise
Bank of America (NYSE: BAC)
Bear Stearns
Columbia Management
Credit Suisse
Deutsche Asset Management
Goldman Sachs (NYSE: GS)
JPMorgan Chase (NYSE: JPM)
Merrill Lynch
Morgan Stanley (NYSE: MS)
Putnam Investments
RBC Dain Rauscher
Raymond James
UBS
Wells Fargo/Wachovia (NYSE: WFC)

This is pretty outrageous even by Wall Street standards, and it tells us a lot about our current regulatory system. If financial firms know that their promises to "not commit fraud" are meaningless, then we've created a culture where there is very little downside to unethical behavior and the aggressive pursuit of dubious new products.

The SEC seems to be saying, "Hey, our lawyers are overmatched vis-a-vis these big firms. The best we can do is try to squeeze out a token settlement every once in a while, and call it a day." Surely our financial institutions know this, and probably view the occasional SEC wrist slap as the part of the price of doing business.

All hope is not lost, however. Just the other day a federal judge called into question the toothless practice of asking firms to make meaningless pledges to not break securities laws in the future. U.S. District Judge Jed Rakoff asked the SEC if these agreements were "just for show." He also made it clear that he had very serious concerns about the settlement between the SEC and Citi. He has yet to decide whether or not to approve the deal.

One way or another, we need to ensure that in the future, financial fraud is treated like the serious crime that it is. Maybe the fines should include a few more zeroes at the end of them, and then double from there for future infractions. Remember the "zero tolerance" policy toward petty crime in New York City in the late 1980s and 1990s? Maybe we need "zero tolerance" for financial fraud on Wall Street in 2011 and beyond. Anything would be better than the current "zero effectiveness" approach. We can do better than this.

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