What began in 2014 as an effort to give economists a voice in an environment dominated by lawyers has now become the epicenter of empirical analysis on financial oversight. At the opening of the SEC Annual Conference, the balance of more than a decade of supervision delivered a clear warning: regulation cannot be a series of “random acts” of punishment.
One of the topics addressed during the event was the analysis of the “broken windows” policy. “This theory, adapted from urban criminology, suggests that prosecuting minor infractions prevents larger crimes. However, the analysis presented questions whether this approach can be transferred to the complex world of white-collar crime,” experts noted during the conference.
Mark T. Uyeda, SEC commissioner, explained that while empirical evidence suggests that monitoring minor infractions can reduce serious financial misconduct, the industry warns of a dangerous side effect: the diversion of limited resources. “Abusing discretionary authority undermines the predictability that markets require,” participants heard during the forum, noting that imposing sanctions over technical issues — such as the use of personal mobile devices for work communications — does not always reflect a consensus on what constitutes unacceptable conduct.
The debate also revolved around the SEC’s own success metrics. In this regard, there is concern that if the success of an administration is measured solely by the number of enforcement actions and the amount of fines collected, regulatory staff may prioritize quantity over the quality of financial justice. According to the experts, the complexity of the current regulatory framework leaves excessive room for “novel” legal interpretations that could chill socially valuable economic activities.
Beyond oversight, the conference also addressed the transformation of institutional savings through the use of ETFs. The figures are striking: in 2005, ETFs represented just 3.2% of assets compared with mutual funds. By 2025, that figure had climbed to nearly 30% of the market, with $13.4 trillion in assets.
According to some studies, a new phenomenon is emerging: managers of these vehicles may be incentivized to adopt highly volatile strategies to attract an increasingly broad base of retail investors, posing new challenges for system stability.
The conference concluded by reaffirming the need for academia to scrutinize the regulator. “In a market that now includes cryptoassets and overnight stock trading, data analysis presents itself as the only tool capable of ensuring that public policies are not merely political reactions, but decisions grounded in economic reality,” Uyeda reminded attendees.
