Regulated by the SEC does not mean much at all. All the major trading scandals have occurred in institutions regulated by the SEC. Trading institutions can do p

Regulated by the SEC does not mean much at all. All the major trading scandals have occurred in institutions regulated by the SEC. Trading institutions can do pretty much what they want - even today there is a huge amount of insider trading and market manipulation despite all the regulation. For example the latest LIBOR scandal. Not sure I agree with your second point either. It is the same point made by Nassim Nicholas Taleb in his book Fooled by Randomness. That theory works fine if you think markets are random. They are are not, they are just hard to understand. Having said that I agree that in the very short term it is impossible to separate a strategy making money randomly from one that is fundamentally sound.