Regulatory Retirement Parties

The Wall Street Journal commented on the state of the U.S. Securities & Exchange Commission (SEC) today in an article by David Weidner.  The article also provided some interesting perspective on the effectiveness of regulatory bodies as they age.  Here is what Mr. Weidner had to say.

Just ask Harry Markopolos, the whistleblower who waged a decade-long, ultimately unsuccessful battle to persuade the SEC to prosecute Mr. Madoff. The commission was clearly reluctant to pester an established Wall Street force. However, the SEC also showed itself to be shockingly incompetent.

Consider Linda Chatman Thomsen’s response to a recent congressional inquiry on the Madoff case. Ms. Thomsen, the SEC’s enforcement director from 2005 to 2009, was asked why the SEC didn’t respond to Mr. Markopolos’ mountain of evidence against Mr. Madoff. “If we knew that it was provable fraud, it (investigating) would be easy,” she said. This is what we can expect when a regulatory body has become too enmeshed with the industry it monitors, according to John Kenneth Galbraith, the late economist.

“Regulatory bodies, like the people who guide them have a marked life cycle,” Galbraith wrote. “In their youth they are vigorous, aggressive, evangelistic and even intolerant. Later they mellow, and in old age – in a matter of 10 or 15 years – they become, with some exceptions either an arm of the industry they are regulating or senile.”

In the U.S., we have not only the elderly SEC, but many other aging regulatory bodies that have lost their effectiveness over time.  It is time to host retirement parties for some of these agencies and streamline our regulatory structure for the 21st century.



About Wheelhouse Advisors
Wheelhouse Advisors LLC is the publisher of The ERM Current™, an online publication and blog dedicated to providing the latest updates on current trends in Enterprise Risk Management & Control. Wheelhouse Advisors provides cost-effective Enterprise Risk Management & Control solutions to both large and mid-size corporations. To learn more about Wheelhouse Advisors, please visit our web site at

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