You know you can count on Enforcement Action to keep a watchful eye out for SEC-related trends, so here's the latest micro-trend I'm seeing: the major news networks take the latest twist in the financial crisis and make a video about it asking, "Where Was the SEC?"

The first example of this came a few weeks ago in this video entitled "Where Was the SEC" from CBS News attaching blame to the SEC, generally, for the developing financial crisis:

The next "Where Was the SEC" video came this week from ABC News, which confusingly (and I would say unsuccessfully) tried to link the recent testimony of Lehman Bros.' Dick Fuld with the SEC Inspector General's investigation into the SEC's handling of an old insider trading case to conclude that "many questions about the SEC's failure to fully enforce Wall Street laws are being raised."

As discussed in my recent post here, the SEC's only real forward-looking, risk-assessing initiative — the Office of Risk Assessment that it introduced several years ago — dwindled down to one lonely person this year. Let's just be polite and say that anyone counting on the ORA to prevent financial disaster anytime soon is being overly-optimistic. The reality is that the SEC, as Christopher Cox says often, "is first and foremost a law enforcement agency." It functions most like a securities fraud policeman, investigating issues after they arise and bringing cases where appropriate. Thus, I would say that asking "Where Was the SEC" after financial fraud has occurred or a financial crisis has developed is a bit like asking "Where Was the Police Department" after your house gets robbed. It's the wrong question.

Topics