In the Hoover Institution of Stanford University’s Defining Ideas Journal, Professor Jonathan Macey argues that the SEC suffers from “three serious maladies” that are causing it to fail. Prof. Macey’s article (“The SEC’s Publicity Hounds”) is a must-read piece that offers some deeper-level thinking on the reasons why, in his view, the SEC is failing in its mission to protect capital markets.
First, Macey says, the metrics used to measure the SEC’s success create “perverse incentives” that cause the agency to “fail, even when it thinks that it is succeeding.” For one thing, he says, it is in the SEC’s interest to “promote the appearance that the capital markets are in crisis” and the the SEC’s form of crisis intervention is the best solution. In addition, the SEC presently must try to impress and satisfy its congressional monitors with “(a) the raw number of cases that it brings; (b) on the sheer size of the fines that it collects.”
