'Regulatory Capture' Rears its Head in Recent Scandals

Within the securities industry they call it “regulatory capture.” It's what happens when governmental watchdog agencies charged with overseeing a given industry get too cozy with the folks they're supposed to be watching and wind up acting on their behalf rather than those of the general public. The scandals at brokerage firms MF Global and now Peregrine Financial Group (PFGBest) that have rocked the futures industry, as well as recent allegations that giant British investment bank Barclays

manipulated key interest rates at the height of the financial crisis, have strengthened long-held fears that securities industry regulators are either asleep at the wheel or, worse, serving the wrong master. After all, the memories of massive taxpayer funded bank bailouts, a deeply flawed ratings system rife with conflicts of interest and Bernard Madoff's epic Ponzi scheme are still fresh in the minds of most retail investors. Continue reading this article

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