The private securities industry self-regulation system should be examined and replaced with a single, Securities and Exchange Commission-type government regulator. Some believe government regulation has no place in the modern economy, but ignoring the continued investigations into the activities of the securities industry and corporate America, purportedly addressed by the Sarbanes-Oxley Act of 2002, is a recipe for disaster. Correcting these problems will only arrive through restructuring the capital markets’ regulatory structure.
The securities industry’s self-regulation system relies on private, self-regulatory organizations (SROs), such as the New York Stock Exchange and the National Association of Securities Dealers, entrusted with quasi-governmental authority, to establish and enforce their own rules, enforce federal securities laws, protect investors and provide market fairness. SROs, however, are beholden to their member firms, i.e., their owners, who have quite divergent interests than those of the public.
