[punkgrrrlie10]

I've read many cases dealing with the SEC going after fraudulent CEOs who were undercapitalizing or using corporate resources for their own personal benefit.

I don't necessarily see a problem with someone holding a microscoping share in a corporation paying an equally microscoping price for the poor judgement of their investment.

It's not always going to be their investment. They could actually participate in the voting process and still be a minority shareholder so the company can go on w/o them in their decisions. Someone may decide unless they can buy at least a certain controlling share, that they perhaps shouldn't invest just b/c they become liable even though they participate and aren't able to have a say in company decisions.

Right, but it's this same attitude that has likewise led to corporate neglegence, environmental disregard, and faulty book keeping.

The system is also set up so that corporate negligence and environmental disregard are punished under criminal theories b/c they are illegal rather than a "risk" taken. Just as surveillance cameras aren't placed in people's homes to make sure they aren't committing illegal acts, it is assumed that corporations will act in their best judgment. Sometimes in business that judgment will be wrong and we can't punish more than what a company is worth when it just comes to mistaken judgment. When it comes to fraud, they are doing something wrong and not within their powers and yes the SEC does go after them. They just don't make the headlines that Enron does.

Isn't capitalism about risk rather than security? Isn't a system set up to protect the investment something other than free market capitalism?

There's a difference between a risk associated w/business, which includes your stock bottoming out b/c the company lost their gov't contract building bombs and stock bottoming out b/c a CEO has committed massive fraud. It's like the difference between going to play with the sharks in the ocean in a cage and going in w/o the cage. One's a risk, the other is a reckless risk. It's not assumed that investing in stock should be a reckless risk which is why there are so many laws in place against dumping stock within certain periods of time for persons with certain percentages and making fraudulent representations about the company to inflate prices.