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The Securities and Exchange Commission is charged with protecting investors from financial fraud and unfair dealing, but time and again it has proved feckless at its job.

This week, U.S. District Judge Jed Rakoff derided the agency for its willingness to settle a case with Bank of America in a way that "victimizes the victims." This disregard for victims was also obvious in the case of Bernie Madoff and his $65 billion Ponzi scheme. Had Madoff's fraud been squelched in 1992 when the first credible concerns were raised to the SEC, most of his victims would have been spared.

The SEC's ineptitude should be part of the conversation as President Barack Obama pushes Congress to add more regulation and oversight to the financial sector. The president also should keep in mind that any new rules are only as good as the people charged with enforcing them; and the SEC doesn't seem to have the right people.

The case before Rakoff involves the $50 billion acquisition of the near-bankrupt investment firm Merrill Lynch by Bank of America. The SEC claims that Bank of America told shareholders late last year that no bonuses would be paid to Merrill executives without the bank's consent. In fact, Bank of America had agreed that Merrill could pay up to $5.8 billion in bonuses.

Under the settlement, which was more about the SEC claiming a high-profile win than about policing banking executives who lie to their investors, Bank of America would pay $33 million in shareholder money but not admit wrongdoing. This would allow the bank's upper management and legal team to avoid answering for their actions. But Rakoff refused to seal the cozy deal, saying it "does not comport with the most elementary notions of justice and morality." Rakoff particularly objected to the fine being paid by the victims themselves - the Bank of America shareholders - and he ordered the parties to get ready for trial.

The judge's rebuke comes after a similarly critical review by the SEC's inspector general over the Madoff scandal. Six substantive complaints over the years prompted a series of SEC investigations that in each case missed Madoff's lies. Investigators didn't attempt to verify Madoff's trades, and they were entirely credulous of Madoff's explanations of his implausible business model. Why? Because they were insufficiently trained, lazy and discouraged by supervisors from pursuing inconsistencies in Madoff's claims, according to the inspector general.

Regulators are the cops on the beat and are supposed protect investments and retirement funds. To rein in the recklessness in the financial system, new regulations are necessary. But so is a corps of regulatory investigators and attorneys determined to enforce the law and punish executives, not just their companies.