The SEC has been demoralized, and defunded for a long time. While people argue regulatory capture, its only a small part. There are other things most people do

The SEC has been demoralized, and defunded for a long time. While people argue regulatory capture, its only a small part. There are other things most people don't know about the street habits and saves - sort of like the hidden rules of your favorite language. Firstly - The SEC is also working to improve. In 2009 they got their new head of enforcement Robert Khuzami - http://en.wikipedia.org/wiki/Robert_Khuzami http://en.wikipedia.org/wiki/Robert_Khuzami Read his wikipedia page, and his case history, this is the kind of person who you Want fighting for you. -------------- Secondly Rituals: Most industries over time identify patterns and streamline them, but for outsiders they would be arcane. Mathbabe, the ex finance girl who decided to leave finance for something, should already know this. For the rest of us: The SEC has x resources - so they pick and choose cases that they know they have a bullet proof case for. AS a result, when its announced that the SEC is investigating you, most Wall Street firms know that they are in trouble. (OTOH most normal people would think its just an investigation, not the announcement of a verdict ) At this point, all firms know they have a call to make - Fight it out, or cave. * Almost Everyone goes to the negotiating table. The thing most firms want is to plea bargain, and then get a statement where they accept whatever fine they have to accept, while never having to publicly admit to wrong doing. Thats the ritual ------ In 2010, there was 1 firm which decided it had the stones to go against the grain - Goldman Sachs. It was hilarious - the disparaging comments here are praise compared to what Fox news and GS churned out. The SEC is clueless and dumb, filled with people who couldn't make it in finance. The SEC is a lap dog of the Govt. etc etc. IIRC the CEO even went on record expressing his confidence on having the case thrown out. The SEC won and GS paid the largest fine (in the SEC's history AFAIK) of $550 million. The next day the news papers were crowing about how the fine is only a blip on the radar a days fluctuation on the stock market. The guy who prosecuted the case, the head of the SEC ---- Also please note the author of the article is reading a book and has recently reached the section which discusses regulatory capture, and is particualrly incensed by it.