Red Flags and Regulations

Do you know where the term “Red flag” comes from?

The earliest citation for “red flag” in the Oxford English Dictionary is from 1602 and shows that at that time the flag was used by military forces to indicate that they were preparing for battle. The earliest citation of “red flag” in the sense of a warning is dated 1777 and refers to a flag warning of flood. The expression “to raise the red flag” come from various usages of real flags in real life. The semaphore red flag (or red light) on railways means an immediate stop, while a red flag is frequently flown by armed forces to warn the public of live fire exercises in progress, and is sometimes flown by ships carrying munitions. A red flag warning is a signal of high wildfire danger and a red flag on the beach warns of dangerous water conditions. In auto racing, a red flag indicates a stop to the race due to dangerous conditions.

Of course, when we talk about Red Flags in the context of Bernard Madoff and the Securities and Exchange commission; we’re talking about metaphorical red flags rather than literal ones–but red flags just the same.

On Sunday, September 18 we hosted a panel discussion titled: Red Flags and Regulations: Maximizing Your Safety in the Investment World
Joining us for the discussion were:
Richard Ferlauto, Deputy Director, Policy at the Office of Investor Education and Advocacy, Securities and Exchange Commission
Donald Langevoort, Thomas Aquinas Reynolds Professor of Law at Georgetown University; Co-Director, Joint Degree in Law and Business Administration

Following are some bite-sized excerpts from the discussion. Enjoy.