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The SEC’s uncomfortable spell in the spotlight is well deserved. Notwithstanding the outcome of Inspector General David Kotz’s investigation into the Securities and Exchange Commission’s conduct in the Madoff affair, its failings are multiple. A mostly unilluminating grilling in Congress on January 5 served to point to likely gulfs in its efficacy. Oversight of Bernard Madoff may or may not have been influenced by his status and relationships. But the SEC’s structure, with four divisions, 19 offices and 11 regional outposts, means that it would be all too easy for information to become bogged down or go astray.

Effective handling of complaints is one practical matter that must be examined and improved. Others include the rules governing linkages (including job offers) between officials and those they are overseeing. Financial whizz-kids looking for a stable pay-cheque will hardly be in short supply, so questions of resources and expertise should, at least, be easily solved, despite budget constraints.

The SEC, though, is one cog in a failed regulatory machine. That is not something that Mr Kotz’s forthcoming reports can address. A product of history, rather than design, US financial regulation remains complex, duplicative and, at times, incoherent. One solution is to crash overlapping bodies together. Squawking politicians should remember that political turf wars have thwarted such suggestions in the past. That, though, is no panacea – the UK’s FSA has hardly fared better for being (relatively) unrivalled.

The incoming administration, focused on economic firefighting, also has a golden chance to redraw the US’s regulatory map, almost without constraint. Someone must determine how banks can serve as financial utilities and innovators; how the safety and the soundness of the system should be safe-guarded; who can best protect investors and where self-sufficiency begins and ends. Bashing the SEC is easy (if admittedly satisfying). It does little to advance the fundamental questions that must now be addressed.

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