I agree with you MCB. The SEC has the ability, its just been weakened administration after administration.

You remember the era of structured notes? The SEC was all over them. But came the grandchildren, the debt swaps, and what happened to the SEC? The bank examiners also were missing in action.

Here's a copy of the examiner guidance for sn's

The Board of Governors of the Federal Reserve System issued SR 94-45 on August 5, 1994 on the subject ofSupervisory Policies Relating to Structured Notes. In that pronouncement, the Board offered the following specific examiner guidance:The technical descriptions and analysis of each of the structured notes discussed in this Product Summary should prove beneficial to examiners charged with making a “bank-by-bank” appropriateness judgement. Still, examiners should incorporate several broad questions into their review of any bank’s use of structured notes. Examples of questions examiners should consider in making an appropriateness judgement are:

1) How does this structured note investment conform with the bank’s investment guidelines?

2) Movements in what underlying markets contribute to the risk of this security?
a. Fixed Income
b. Foreign Exchange
c. Commodity
d. Equity
e. Other
f. Combination

3) How is the market risk embodied?
a. Volatile, zero, or negative coupon payments
b. Principal Amortization
c. Principal Loss

4) How does this market risk profile relate to the bank’s traditional business risk profile in size and scope?

5) How frequently is the market risk profile of the structured note re-evaluated?

6) Is there leverage in the security structure? If so, how much?

7) Is the security callable? If so, when and under what scenario(s)?

8) What is the best case scenario the bank may hope for vis-a-vis this security?

9) How does this best case scenario affect other aspects of the bank’s business?

10) What is the worst case scenario for this security?

11) How does this worst case scenario affect other aspects of the bank’s business?

12) When purchasing the security, how was a determination made as to whether the bank was adequately compensated for the market risks just identified?

13) If the bank decided to sell the security today, how would the bank derive a fair market value and who might be potential purchasers? Although this is not an exhaustive list of the issues purchasers, and hence examiners, should address, it can serve as a starting point and encourage more detailed discussion.
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Makes one want to cry. If only they had been asking, really asking, these questions starting five years ago.