SEC: Do as We Say, Not as We Do

Perhaps it would have been better if regulators had merely "been asleep at the switch," as President-elect Barack Obama said last week.

Sadly, the reality is much worse for at least some workers at the Securities and Exchange Commission, who have been very busy doing things other than what they were hired to do.

Its semi-annual report to Congress -- which was conveniently released the Wednesday after Thanksgiving -- read like a shopping list of things not to do at work. After reading this report it's no wonder Bernie Madoff got away with as much as he did. Perhaps the newly nominated SEC chairman Mary Shapiro will do a better job than Christopher Cox in getting the workers to do the jobs they were actually hired for.

First, let's decide which is worse: personal trading while working at the SEC or surfing for porn. Let's start with porn. Now it wasn't just "accidentally" clicking on a Web site that was sent via email. This was a calculated effort to bypass the filters on blocked Web sites after getting numerous denials, according to the April-through-September report. There's more than one way to peel an onion. Maybe if the SEC used those smarts to track down fraud instead of sexually explicit material, it would be more effective. Even after the Office of Inspector General recommended that management take disciplinary action, some employees had gone unpunished as late as September 2008.

Some staff members violated commission rules governing employee securities transactions. Obviously when you are trading your own account it's hard to find time to regulate other people's trading. This investigation, as of September, is still pending. However, maybe the employee is just doing due diligence. It's important to know securities fraud in order to detect it.