Life is about playing by rules. Sometimes we make a pact to voluntarily follow a set of rules – like when we play golf or tennis or darts or ping pong.

Other times we are requited to obey a rule regardless of whether following the rule is something we want to do. Many of these mandatory rules are called laws, and we comply with laws that we don’t like because we worry that the consequences of breaking the rules – of breaking the law – will be unpleasant.

There are plenty of people for whom the annual act of filing a federal income tax return and “giving away” some of their money to the tax man is about as bad as being strapped into a chair in the office of a dentist armed with a drill a sadistic streak, and no anesthetic or anesthesia.

As painful as filing can be for some of us, the fact is that the vast majority of us still file on time in whatever manner the law requires.

Why? Because, as unpleasant as the consequences of forking over our cash to the federal government is each year on April 15, this temporary pain is trumped in our psyches by the threat of what might happen to us if we choose not to file and one day we get busted for tax evasion. (think Al Capone)

Wall Street today is filled too many powerful men and women who literally ignore the anti fraud provisions of the federal securities laws.

Like the US tax code, the Securities Exchange Act of 1934 is a federal statute. A law of the United States.

And there are a range of very serious penalties that are supposed to discourage folks from committing securities fraud, just like our concerns about all the bad things that might happen if we blow off our taxes gives most of us incentive enough to, well, NOT blow off our taxes.

But – at least for purposes of this post – assume that our little hypothesis about why people who might otherwise decide not to pay taxes is correct. How then to explain the staggering number of multi-billion frauds of the past decade? Why should one federal statute – the one that prohibits fraud – be a less effective deterrent then another?

By now, if you follow this kind of stuff, the answer should be pretty clear. It is an 11 letter word that starts with f and ends with… No, really, it starts with E and ends with MENT. That word is enforcement.

It seems apparent to Wall Street Law Blog that there is very little fear among the upper crust of the financial world about any real possibility of enforcement. (An 11 letter synonym that also works here is PROSECUTION).

Last question – what happens when there are rules that nobody really believes will be enforced? Easy answer. People cheat. A lot.

By Brett Sherman

The Sherman Law Firm

Editor Wall Street Law Blog

Http://wallstreetlaw.typepad.com