The SEC was formed to protect investors. It didn’t do its job.
That's primarily because the hedge funds that were buying these mortgage backed securities really had no clue as to what the quality of those mortgage backed securities were, the risk attached to them and in many cases - who actually held the paper for them.
It was like a game of "hot potato" where the last guy holding the mortgages when the timer went off was the one that got burned. As we now know, that was the big "investment" firms that were heavily leveraged in mortgage backed securities such as Lehman Bros.