The Industry Advisory Council, a nonprofit group dedicated to improving communication and understanding between government and industry, said in a recent report that part of the government's failure to properly police the financial markets could be related to information technology.

The group said the multiple financial regulatory agencies have fallen behind the rapid growth of the global financial industry, and have relied on fragmented information technology systems that do not connect or overlap, and which have had the unintended effect of keeping federal authorities in the dark.

"We believe that there is an urgent need for a common technology strategy for financial industry regulation," the report noted. "This could enhance governance and oversight of financial institutions, enable efficient implementation of new regulations and assist in more effective application of existing laws.

The report continues, saying that, as it stands now, "financial institutions operate as distinct entities from an IT perspective, and use their own proprietary models, systems and risk and valuation methods. The result is that communications and data transfers across agencies and between the government and private sector are encumbered by limited and inefficient exchanges."

For more on the shortcomings and solutions for financial regulation:
- see IAC's paper on modernizing the financial regulatory system