The fiasco surrounding the IPO of Facebook (FB) was a classic comedy of errors, with stock underwriters, exchange operators and the company’s insiders denying everything and blaming everyone but themselves. But the real blame points to the Securities and Exchange Commission and its failure to enforce its very own rules.

Look no further than the Securities and Exchange Act of 1934, Section 9, which strictly prohibits all securities manipulation. It states in part: “It shall be unlawful for any person, directly or indirectly, by any means to create a false or misleading appearance of active trading in any security registered on a national securities exchange, or a false or misleading appearance with respect to the market for any such security.”

Yet, on Facebook’s very first day of trading, Morgan Stanley (MS) engaged in legalized market manipulation by artificially boosting Facebook’s shares to make sure they wouldn’t close below the $38 offer price. The Wall Street Journal even described Morgan Stanley as Facebook’s “stabilization agent.”

The other issue of whether Facebook violated Regulation FD by sharing non-public material information with a select group of analysts and investors, while simultaneously withholding this same information from public investors, is only icing on the cake.

Since its adoption in August 2000, Regulation FD has for the most part worked. The idea was to prevent selective disclosures by publicly traded companies and to make sure that those companies simultaneously disclose material nonpublic information—not just to their friends in high places—but to everyone at the same time. Regulation FD is another reason that beating low cost index funds and ETFs has become so much harder for fund managers; because they can’t scoop meaningful information from companies ahead of the market. The only time Regulation FD doesn’t work, is when the SEC fails to enforce it.

Here’s the point: What good are a zillion securities rules if regulators ignore or selectively enforce them?

The fact is Wall Street gets away with whatever the SEC allows Wall Street to get away with. Hand slaps and fines without “admitting or denying any wrongdoing” are hardly the formula to dissuade callous law breakers. (Maybe three days in the Congo jungle without food and water will do the trick.)

If the SEC wants to do some real investigating, it should start by looking closely at a mirror.