Top Cop or Regulatory Flop? The SEC at 75

In their forthcoming article, Redesigning the SEC: Does the Treasury Have a Better Idea?, Professors John C. Coffee, Jr., and Hillary Sale offer compelling reasons to rethink the SEC's role. This article extends that analysis, evaluating the SEC's responsibility for the current financial crisis and its potential future role in regulation of the capital markets. In particular, the article identifies critical failures in the SEC's performance in its core competencies of enforcement, financial transparency, and investor protection.The article argues that these failures are not the result, as suggested by the Treasury Department Blueprint, of a balkanized regulatory system. Rather, the SEC has failed to maintain its functional effectiveness in a time of increased financial market complexity – complexity stemming from financial product innovation, globalization and the growing role of financial intermediaries. This complexity demonstrates the shortcomings of self regulation and places an enhanced premium on the SEC's core competencies, particularly maintaining effective financial disclosure. As a result, this article argues that regulatory reform should not entail a massive overhaul of the regulatory structure but should instead improve the SEC's effectiveness through a renewed emphasis on leadership, increased independence, and enhanced oversight and analysis of market developments