IGX

Fining companies for malpractice is not enough. Fraud and incompetence undermines the whole market system. And it damages real people, like the pensioners robbed of interest by the low Libor number and cities like Baltimore that lost millions on interest-rate swaps.

Wrongdoing should be investigated: not by regulators, or panels of posturing politicians, or costly and long-winded public inquiries--but by the police and the Serious Fraud Office. And if it turns out that junior executives acted fraudulently and senior executives let them, or if regulators and politicians actually encouraged it, offenders should face fines and long-term disqualification.

Where fines are levied, it is generally on corporations rather than individuals, which means that shareholders and customers (and indeed taxpayers) end up paying instead of those actually responsible.

Regulation is not best delivered by constantly peering over the shoulders of traders at huge bureaucratic cost. It is served by setting clear, broad rules, and by punishing those who break them.

Of course, that presumes the enforcement agencies are competent too. After a dawn raid and a 15-month investigation, the Serious Fraud Office last month dropped its action against Vincent Tchenguiz, whom it alleged had lied about the value of U.K. investments that were pledged to Iceland's Kaupthing Bank. In fact he hadn't, and the SFO's warrant was flawed. Now the taxpayer faces a compensation bill of £100 million.

So it is taxpayers who will stump up—not the flatfeet who got their paperwork wrong.

Wrongdoing should be investigated: not by regulators, or panels of posturing politicians, or costly and long-winded public inquiries--but by the police and the Serious Fraud Office. And if it turns out that junior executives acted fraudulently and senior executives let them, or if regulators and politicians actually encouraged it, offenders should face fines and long-term disqualification.