SEC and SROs: Chronic Failure to Catch Insider Traders

Gretchen Morgenson is, in Sunday's NYT's business section, shocked, shocked that the SEC does not have an updated computer system designed to catch insider trading.  What is shocking is that this is news to her.  The split between SROs and the SEC on enforcement of the securities acts has always been a tenuous marriage.  It was a political compromise in 1934 that survives today and should be scrapped.  The effect, which has been evident for over forty years is that federal enforcement lags and both the SROs and the SEC blame each other.  Neither has the full incentive to enforce because accountability is shared.  Here the SROs says it gathers data but does not act on it other than sending it to the SEC.  The SEC gets the data, which it does not gather, and attempts to sift through it to act on it.  But the SEC is understaffed and overworked (the product of relying on SROs) and their computers and not totally in sync with the newer SROs systems.  The result?  Poor enforcement.  The result is endemic to the split in enforcement responsibility and will continue to reappear in new guises -- when we can be shocked, shocked once again.