WikiLeaks versus the SEC

No, (to my knowledge) Wikileaks hasn't released detailing corruption in the SEC.  Instead, Sherron Watkins, the primary whistleblower in the Enron fraud, weighed in on the SEC's new incentives for whistleblowers.  In a panel discussion about whistleblowers held by the New York State Society of Public Accountants, Watkins said the following (via the PaperTrail):

“I don’t think the SEC’s culture is one that will make this effective one iota,” said Sherron Watkins, a one-time vice president at Enron, referring to expanded protections for whistleblowers included in the Dodd-Frank financial reform law.

If she was in the same situation today as 10 years ago, when Watkins approached government authorities about accounting fraud at Enron, she would probably instead take her information to an organization like WikiLeaks, Watkins said.

Watkins said that she did not believe that the SEC is capable of evaluating and acting on valid tips that involve complicated financial maneuverings. The fallout from ignoring whistleblower Harry Markopoulos, who repeatedly warned the SEC of Bernie Madoff’s multi-billion-dollar Ponzi scheme, but was ignored, still haunts the agency, Watkins said. 

Is this surprising?  Should we expect the SEC to effectively police the economy?  I suppose I see the SEC primarily as a regulator--they protect the economy by putting the right rules and incentive structures in place.  They also work to make sure those rules and incentive structures are enforced/used correctly, however, much of the active policing of the economy needs to be done by other parties (e.g. public accounting firms, credit rating agencies, other assurance providers, journalists, and even the law firms who pursue fraudsters in civil cases).  If we expect the SEC to be able to actively and effectively police fraud, we probably need to start by significantly increasing funding for the agency.  The way things currently stand, the SEC is way too underfunded to be our primary watchdog.

However, I am okay with the SEC embracing the role of a regulator, and minimizing the role of the agency as a watchdog.  I am okay with whistleblowers preferring to turn to WikiLeaks, auditors, journalists, and other outlets, as I believe that those outlets can be an effective fraud deterrent, given the right regulatory structure.  So I suppose, in sum, I see Watkins' comments as less of an indictment of the SEC and more as a indicator that we might be moving in the right direction with the advent of new fraud deterrence mechanisms like WikiLeaks.