Mercatus Scholar Hester Peirce Discusses Regulators' Failure to Follow Own Rules (with Lofchie Comment)

Mercatus Scholar and former Congressional and SEC staff attorney Hester Peirce posted a commentary titled "Regulators Foist Do as We Say, Not Do as We Do on Wall Street," arguing that financial regulators' hold themselves to less demanding standards than those they apply to their regulated entities.

According to Ms. Peirce, the SEC's microphone malfunction during the meeting adopting Regulation SCI, which requires stock exchanges and market infrastructure providers to ensure that their technology functions properly, is a symbol of the problem that "too often, regulators writing and enforcing standards do not adhere to their own standards."

She cited other examples of regulators' "do-as-I-say-not-as-I-do attitude," including a recent GAO report finding problems with the SEC's internal controls over financial reporting, as well as a GAO report identifying internal control problems at the CFPB. Additionally, Ms. Peirce mentioned a recent GAO review of the Financial Stability Oversight Council, which found transparency, documentation and recordkeeping problems within the agency.

According to Ms. Peirce, regulators are "forgiving of their own failures and ready to pounce on regulated entities for the smallest infraction."

Lofchie Comment: As to technology related issues: stuff happens. Regardless of the reasonable, or best, efforts of any firm, things will go wrong with technology. Every technological failure should not be treated as a violation of law; such a harsh reaction will not cure all technology problems. It will only discourage the sharing of information about such problems and dis-incentivize firms that have experienced problems from sharing their experiences.

See: "Regulators Foist Do as We Say, Not Do as We Do on Wall Street" by Hester Peirce.