The FDA and the SEC hypothetically play the same role in our lives: to protect us from products that could harm us.
If you're selling a new drug, you can't escape the strict oversight of the FDA. But if you're selling a new investment product, you'll have a much easier time getting it past the SEC. Prescription drugs must be safe and effective, but there is no law stating that investment products have to be effective. Or even that they have to be safe.
Why is that?
Imagine the FDA shrugging their shoulders after an unsafe drug caused death or injury to innocent people. Suppose the FDA said something similar to what we hear all the time from Wall Street:
"You should have done your research. We told you there was risk involved."
The public would be outraged--and rightfully so.
The FDA requires 12 steps to drug approval. Most drug products can't pass the first three. If they do, they face three more trials. It can take years to get a safe, effective drug to market. But given the consequences of a poorly vetted drug, few of us would advocate eliminating steps to speed the trial process along.
The SEC, on the other hand, is under constant political pressure to shorten and eliminate their approval processes.
To further protect consumers, the FDA recalls approved drugs that are later found to be harmful to get them off the market (remember Fen-Phen?). The SEC can't--or won't--follow suit. They made virtually no effort to prosecute even the worst actors for their roles in the credit crisis of 2008. Further, they failed to pursue Bernie Madoff even though they had been informed of his scam long before he confessed.
The ultimate victim of the SEC's inadequate oversight is the investor. Too many financial products, promising too much, come to market every day. Investors deserve to be protected by an SEC that takes our financial health as seriously as the FDA takes our physical health.