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Outsourcing the SEC's Oversight Function Could Strengthen the Agency

Posted: January 12, 2012
By: Laura Goldman
Source: Business Insider
Practice Areas: Securities Litigation

Although many thought that the SEC's nadir was their failure to detect the Madoff and Stanford frauds, the missing $1.2 billion in customer funds at MF Global shows that the incompetence of financial regulators in the United States has now sunk to previously unfathomable lows. The investing public's only hope is that they have hit rock bottom and will now consider rehab.

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Privatization of law enforcement duties has a long history. Abraham Lincoln probably regrets not being guarded by his regular Pinkerton detectives the night that John Wilkes Booth entered the theater. Municipalities regularly use private security officers to guard government buildings, the care of prisoners is often privatized, and bounty hunters are rewarded for catching fugitives. While the city provides a minimal level of police service, San Francisco is divided into patrol areas and licenses were auctioned off to private security firms. The private contractors, who can make arrests, write tickets, and conduct investigations, customize their patrol services to the individual needs of the resident. The independent companies answer to both a government body and the individual consumer.

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"Privatization of some SEC functions is what my firm has been doing for 30 years," said Todd Collins, a partner at Berger Montague. "The plaintiff's securities bar is demonized for doing too much, just as the SEC is criticized for doing too little."

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