Bear Stearns was founded as an equity trading house by Joseph Bear, Robert Stearns, and Harold Mayer in 1923. The financial firm was based in New York and was one of the largest global investment banks in the United States. It engaged primarily in capital market activities, including equities, bond trading and investment banking, wealth management, and global clearing services. Since 2003, Bear Stearns sponsored two hedge funds, the High-Grade Structured Credit Strategies Fund and Bear Stearns High Grade Structured Credit Enhanced Leverage Fund, both made up of complex derivatives backed by home mortgages.

Question: Prior to the collapse of Bear Stearns and the bankruptcy of Lehman Brothers, investment banks were subject to the supervision of the coordination of the Security and Exchange Commission, the State of New York and the self-regulatory program. In your opinion, what should have been done to avoid the oversight of the regulatory organizations for a more restrictive risk management control, especially for the highly leveraged investment firm?