Compliance

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Outgunned: Why the SEC Can't Effectively Police Wall Street

Even as the SEC and CFTC ramp up their technology, they still lack the firepower to effectively police the capital markets.

The Securities and Exchange Commission was severely criticized for failing to seize multiple opportunities to stop Bernie Madoff before he swindled investors out of $65 billion, and the commission's reputation was further savaged by the financial crisis, when regulators were accused of being asleep at the switch. As accusations of ineptitude and failure to react to changing market forces continue to plague the SEC, it is fair to ask: Is the SEC relevant in today's increasingly fast, electronic markets?

Industry observers confirm that the SEC has made some evident (and other less manifest) strides since the financial crisis. But one former SEC employee who now works for another regulator says the SEC and other regulators were ill-prepared for the financial crisis.

"Firms and regulators didn't know who owed how much money, who was trading in what. You never knew who valued [derivatives] or how," according to the regulator, who spoke on the condition of anonymity. "There was also the problem of how firms could disclose the valuation of their income when their holdings change every day, every minute."

Read the rest of this article on Wall Street & Technology Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

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