You can’t make this stuff up.

The FBI is investigating two employees at the SEC for insider trading. To put this investigation into the proper context, let’s flip to the agency’s website. And I quote:

“The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.”

Okay. Sounds reasonable. I’m on board.

As I read The New York Times article about the investigation, therefore, it’s hard not to be annoyed. Inmates are running the asylum at the SEC. Let’s spend a few minutes and break down the story.

NYT: Referring to the findings of an investigation, the newspaper reported, “It also found that the agency had ‘essentially no compliance system in place to ensure’ that its employees did not engage in insider trading.”

Norb: This is a classic case of “do as I say, not as I do.” Wall Street firms have huge legal departments. The lawyers do nothing but monitor compliance with government regulations. I often refer to one of my previous employers, an investment bank, as a “small law firm with a large financial services subsidiary.”

NYT: “The woman was found to have spent much of her workday sending e-mail messages and scouring the Internet for information about stocks, while the man sent stock tips — sometimes from the female lawyer — to his brother and sister-in-law from his agency e-mail account.”

Norb: Nice job. Are SEC employees day trading at the office? Recent gaffes make more sense now. This kind of work environment explains how the SEC missed Bernie Madoff, even though Harry Markopolis gift wrapped a law suit for the agency in 2005.

NYT: “The report also said that management and staff within the enforcement division had ‘different interpretations’ of the confidentiality policies surrounding investigations.”

Norb: Where’s the disagreement? The SEC website is clear on the topic. “Insider trading is illegal when a person trades a security while in possession of material nonpublic information in violation of a duty to withhold the information or refrain from trading.”

Back in 1919 and 1920, the acronym for Charles Ponzi’s company was SEC. His firm was the Securities Exchange Company. I have long been amused by the similarity to our regulatory watchdogs: Securities and Exchange Commission.

Not anymore.