[zekevermillion]

Unfortunately your notion of the SEC as neutral referee for a fair market is not reality. The SEC lacks the resources to enforce the law consistently even within a narrow mandate. Its approach is to target specific violators as a deterrant and/or to make known what it considers to be the proper interpretation of securities laws. Some people consider this to be a major defect in US securities enforcement regime and suggest that the SEC should be resourced appropriately to the immense task. Personally I have no idea what they would need to more systematically pursue violators, but wild guess would be a couple orders of magnitude more funding and personnel.

In the realm of securities fraud, I would say that the private securities bar does about 90% of the impact (in terms of judgments and settlements). And successful criminal referrals a la Enron are quite rare, proportional to the actual amount of fraud going on.

By the way, Enron was a fraud against its own investors. Enron was not about fraud against short-sellers, it was fraud against purchasers of Enron stock. Not that short-sellers don't deserve honesty, just saying that they do not typically receive much love from regulators. From what I can tell, it seems this is not solely due to the disposition of said regulators, but also because of legal uncertainty around short-sellers' rights under securities laws.