A rush to regulate will naturally follow the mess over Enron Corp.
It will be in order. The Enron house of cards never should have reached the height that it did.
Protection against public deceit in matters of investment is partly the role of government and partly the role of self-enforced standards of the accounting profession.
Both failed in the Enron case. Both need repair. At stake is public confidence in investment markets.
The obvious place to start is the conflict of interest that arises when an accounting firm provides both auditing and consulting services to the same client.
That's what happened with Enron and Arthur Andersen. The accounting firm faces intense suspicion that lucrative consulting contracts with Enron compromised its judgment in audits of the formerly swashbuckling energy trader.
It isn't the first time the practice has raised concern.
USA Today noted in its Jan. 17 edition that in 2000 Arthur Levitt, while chairman of the Securities and Exchange Commission, proposed a rule that would have prohibited the mixing of auditing and consulting services for individual clients.
According to USA Today, the American Institute of Certified Public Accountants fought the proposal. So did "dozens" of members of Congress.
After Enron's crash, Levitt's idea looks like a good one.
And professional self-policing looks weak.
The evident need for tighter regulation, however, invites mischief.
The political tendency will be to hunt down villains and inflict punishment. That's what courts and SEC enforcement are supposed to be for.
The aim of the coming regulatory push should be to improve the quality of information available to investors about companies.
Part of the improvement must be the elimination of conflicts of interest among the involved parties. Another part of it must be better enforcement of disclosure requirements.
What regulation must not do is try to protect investors from the consequences of investing poorly.
As has been noted here before, the losses generated by Enron's collapse didn't have to be as great as they were.
The fishiness of Enron's financial reports was well-known long before the firm's executives began their amazing disclosures of past accounting lapses.
People shouldn't invest their money in companies with indecipherably complex financial records.
But regulation probably will never stop them.
(E-mail the author at email@example.com)