Who Regulates the Regulators?

"The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation."

That's a direct quote from the SEC's "How the SEC protects Investors" webpage. Arguably, the single most important element for sustaining this mission is fairness. How does the SEC sustain fairness? By maintaining market efficiency and transparency through public-disclosure. The dissemination of market information is critical to fair dealing and fraud protection in any market. But it's of particular importance in the securities market because this information is often the sole factor for the public to rely upon. For example, I can't exactly call up management at Google, AIG, Citibank, or GM and say "hey guys, so tell me, is there anything that could go wrong this quarter or any long-term debt obligations you guys wanna tell me about? I got about a mil riding on you?" The SEC mandated Form 10-K easily disposes of such matters, allowing investors a fair chance to invest w/o blind reliance. Undisclosed risks would pollute the essential risk-return relationship trading markets are known for.

Ask yourself, if there are measures in place to check disclosure, protect investors, maintain fairness, and efficiency, why does the public get dooped so frequently??? Is it the analysts? Let's not forget, Enron was mysteriously rated as a top pick by analysts across the board only weeks prior to their earnings recalculation announcement, when their shares fell from $90 to .50 cents. When do the turds actually start hitting the fan?

Let me sprinkle some more pepper on this well done issue: Today's WSJ reports "Insider Trading Probe at SEC". Ok so a few guys that were supposed to be our watchdogs ate the steak. What's that got to do with you and me. How about regulators using information for personal profit, not public protection. Even worse, how about the public relying on a false sense of protection? Partial protection is like having breaks that work once in while-- would you feel comfortable doing 65 mph knowing you could "sometimes" rely on your breaks?

Quote from WSJ: The SEC has "'essentially no compliance system' to detect potential insider trading. It said the agency didn't conduct spot checks on trading and the various offices that received trading reports didn't share information."

Additionally: "Any trades employees make have to be reported to the agency's director of personnel within five business days. The report said the SEC doesn't have someone in that position but that there is an associate executive director in Human Resources. It said several SEC employees were unfamiliar with the rules or misunderstood them."

My point is this: How can we rely on financial policing by persons who act in self-interest and don't even have the means to protect us? That's not to say the SEC is to blame for every financial fallout, but then again...

http://online.wsj.com/article/SB124241028545124563.html#mod=testMod