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Business: Best columns


Make the SEC like the DMV

The New York Times

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Wall Street regulators could learn a thing or two from the DMV, said Joseph S. Fichera. Over the past six years, the Securities and Exchange Commission and others have levied more than $125 billion in penalties on banks in connection with the financial crisis. Yet financial penalties “are no longer an effective deterrent” against wrongdoing, since big banks now consider the fines just “another cost of doing business.” To “get better behavior” from repeat offenders, the SEC should adopt the DMV’s point system. Points, as many drivers know, are nonfinancial penalties that accumulate on a driving record for infractions like speeding or running a Stop sign. Gather enough points in a certain period, and your license is suspended or revoked. Drivers may not change their behavior after the first violation, “but as they near the threshold, they tend to drive more carefully.” The same could be true for Wall Street banks. Firms would know “how and when they could lose their license,” and regulators would have more leverage in “tackling recidivism.” Fines alone will never achieve better behavior, but a transparent point system “would make Wall Street focus on its driving record instead of merely paying off the next traffic ticket.”