Shocking? Not Really,,,

The initial SEC terrorist "business partner" list had little basis in reality because the SEC had little stake in the definition. The "government" list should be published by an organization with substantial overseas experience. All of this leads me to believe that no one, political or otherwise, will be able to devise a universally acceptable list of standards. Couple this with the prevailing fact that divestiture laws vary widely and we believe that mandated divestiture will grow ever more confusing. We predict epic displays of grandstanding from politicos at the State and Federal levels. We may be back to square -1.

No one, NO ONE, wants to offer financial support to regimes that sponsor terrorists. But I wonder how can these efforts have any impact? And yes, we still do not know why Cuba is on this list.

WASHINGTON (via CBS MarketWatch) -- The Securities and Exchange Commission's new list of public companies that invest in five countries that support terrorism is flawed and should be revised or eliminated, a senior U.S. lawmaker said in a letter released Friday.

The regulator's list, announced on June 25, names companies that have business relating to North Korea, Syria, Iran, Sudan and Cuba. Those five countries have been named state sponsors of terrorism by the U.S. Secretary of State. See SEC Web site.

House Financial Services Committee Chairman Barney Frank, D-Mass., told SEC Chairman Christopher Cox in the letter that he is concerned about the compilation of the list.

Sticking it to the Taxpayer

In an interesting and in our opinion potentially clever move, the Pennsylvania House of Representatives has voted to hand state taxpayers the bill associated with their state's Sudan divestment effort. Under the legislation, taxpayers will be required to pay for losses sustained as a result of divestment. Pennsylvanian Taxpayers' first question should be: why? Currently, the bill does not determine how losses will be calculated. Will losses be netted against gains in new stocks that are purchased which are Sudan-free? Will investment managers submit a list of stocks they would have purchased without Sudan divestment restrictions and the resulting foregone gains? What if share prices of companies with links to Sudan fall? Perhaps a tax credit for Pennsylvania taxpayers is due? Not likely.

Relinquishing potential returns in Sudan-linked companies is one issue, but forcing the taxpayers to pay will likely be a hot topic. Unless, of course, this is a strategy to expose the complexity/futility of underlying divestment issues.

Cashing In

While it remains to be seen if targeted divestiture strategies will succeed in pressuring countries to behave, one thing is clear, the process of restricting finances to companies operating within countries guilty of sponsoring terrorism and genocide can be quite lucrative for social investing proponents. Claymore Securities has partnered with KLD to launch the Claymore/KLD Sudan Free Large Cap Core ETF (KSF). The new ETF has an expense ratio of 0.50%. Assets will likely flood in as more state governments pass divestment legislation. Read more by following the link to thestreet.com.

Vacation

We apologize for the lack of new postings but now that our summer vacations are over the blogging will resume.