At a time when the Securities and Exchange Commission is under pressure to enforce existing rules and write new ones, it has been busy giving companies permission to ignore the law.

Companies that bump against legal restrictions — brokerages, stock exchanges, life insurance companies, and mutual fund managers, for example — routinely argue that no harm would come from cutting them slack.

The SEC often agrees.

It has issued scores of orders in the past few years exempting individual businesses from rules including how they can use clients’ money and how much information they must disclose to the public.

The financial crisis spurred the government to tighten regulation of Wall Street on a variety of fronts, but some of the SEC’s exemptions seem to poke holes in those efforts.

Currently, for instance, the agency is preparing new restrictions for money-market mutual funds, still haunted by the meltdown of 2008, when a major fund was overwhelmed by customers demanding their money back and the government put taxpayer dollars on the line to backstop the industry. SEC Chairman Mary L. Schapiro has said she wants to prevent trouble at a single fund from triggering broader problems.

But in December, the agency issued an exemption allowing individual mutual funds administered by John Hancock to lend money to each other, potentially exposing them to each other’s troubles. Hancock argued that the exemption would come in handy if any of its funds have too little cash to meet customer withdrawals.

The conduct of credit-rating companies has also come under scrutiny since the financial crisis. In 2010, Congress expressed concern about conflicts of interest in the credit-rating business. Saying that faulty ratings had contributed to the crisis, Congress directed the SEC to reduce the financial system’s reliance on credit ratings.

But, last year, the SEC told the Kroll Bond Rating Agency it could disregard a rule meant to make credit-raters less beholden to the companies they rate. Kroll wanted to charge companies fees to rate their securities, and the SEC temporarily waived a limit on the amount of revenue Kroll could derive from any one company.

At the height of the financial crisis, short selling — a form of trading that pays off if stocks fall — was widely blamed for destabilizing major Wall Street firms. In response, the SEC adopted a rule limiting short sales that it described as “potentially manipulative or abusive.”

But early last year, the SEC carved out an exemption for the New York Stock Exchange.Citing highly technical considerations, the SEC concluded that its rule could have obstructed “the normal operation of the market.”

In each of these examples, the companies essentially argued that strict adherence to the rules would be counterproductive.

For the SEC, the authority to make exceptions cuts two ways. While it gives the agency the freedom to give away the store, it also gives it the flexibility to embrace new ways of doing business, said William A. Birdthistle, who teaches securities regulation at IIT
Chicago-Kent College of Law. Overall, he said, the system strikes a useful balance.

In a recent report to Congress supporting its budget request, the SEC said it grants relief from laws when “doing so is consistent with the protection of investors.”

“These orders can serve as a testing ground for useful innovation,” the SEC said.

Fielding requests for exceptions is such a significant part of the SEC’s work that it tracks its response time as a measure of its performance. During the last fiscal year, the SEC said in the budget document, its Division of Investment Management issued timely initial comments on such requests 100 percent of the time. The document did not explain the SEC’s definition of timeliness.

Nor did the SEC release statistics on the total number of exemptions sought or granted, and tallying that information independently would be difficult. Though some of the permissions are explicitly posted under the heading “Exemptive Orders,” many are not as neatly categorized.

The Washington Post reviewed what may be the biggest — but certainly not the only — category of exemptions: those involving a law called the Investment Company Act of 1940, which is largely concerned with protecting investors from conflicts of interest. The Post identified 188 orders issued by the SEC from 2009 through 2011 allowing companies to break that law or related rules.

Blanket dispensation

Sometimes, the exception becomes the rule.

As privately traded companies, Twitter, Facebook and Zynga would have been required to disclose extensive information about their business, including their profit or loss, once they gave restricted stock units to 500 or more people. Each received a special dispensation allowing them to cross that threshold without making the disclosures. Eventually, the SEC issued a blanket accommodation for all companies concerned about tripping the same wire.

Over the decades, whole categories of financial products have developed through SEC exemptions — including money-market funds and exchange-traded funds.

In making its case for an exemption, John Hancock, the mutual fund manager, told the SEC that situations could arise in which “certain John Hancock Funds have insufficient cash on hand” to meet customer withdrawals. In those instances, borrowing from other John Hancock funds “would provide a source of immediate, short-term liquidity,” the company said.

The risk of default would be so remote that the funds lending the money would rarely require collateral, John Hancock told the SEC. Collateral provides an added measure of security for lenders.

John P. Freeman, an emeritus professor at the University of South Carolina School of Law who has written about mutual funds, said the arrangement could allow problems at one fund to affect others.

“What this is about is hitting up shareholders and turning shareholders into lenders of last resort when managers get their funds in trouble,” Freeman said.

While Hancock said the arrangement would benefit both the borrowing and lending funds, Freeman questioned whether shareholders in any of the funds could count on getting the best deal possible.

John Hancock spokeswoman Beth McGoldrick said in a recent e-mail that the firm was not yet using the exemption and it was therefore “premature for us to get into any details on our program.”

In an application filed with the SEC, John Hancock promised that it would “ensure equitable treatment of each Hancock fund,” and it said the SEC had already granted similar dispensations to more than a dozen mutual fund groups.

Conflicts of interest

In the case of Kroll, the bond-rating agency argued that its exemption would benefit investors by fostering competition in the credit-rating business — a goal Congress has endorsed.

In the past, Kroll made money by charging users subscription fees for access to its ratings. But when it decided to expand and challenge big rating agencies such as Moody’s and Standard & Poor’s, Kroll looked to adopt their business model, too.

These big credit-rating agencies are generally paid by the companies whose creditworthiness or securities they are rating. The fees can amount to hundreds of thousands of dollars to rate a single security.

To address the resulting conflict of interest, the SEC issued a rule saying that rating agencies cannot provide ratings for companies that account for 10 percent or more of their revenue. Otherwise, the SEC reasoned, the client could hold too much influence over the rating agency.

But the rule threatened to block Kroll’s way as it ramped up. Until it amassed enough clients, some of its clients would provide more than 10 percent of its revenue.

If the SEC forced new entrants to follow the rule, “you would never have a start-up rating agency,” said James Nadler, president of Kroll Bond Rating Agency. In September, the SEC gave Kroll permission to violate the prohibition through the end of 2012.

In the case of the New York Stock Exchange, the exchange argued that the SEC’s effort to rein in abusive short selling was out of step with the mechanics of trading in that market.

The SEC has said its rule was meant to prevent “bear raids” and other manipulative trading tactics from exacerbating price declines and shaking confidence in the markets. The stock exchange argued that for technical reasons, it would be hard pressed to use the price benchmark the SEC had prescribed to determine how restrictions should kick in under some circumstances, such as the opening of the trading day.

In a letter to the NYSE, the agency said it was granting the exemption “on the basis of your representations, but without necessarily concurring in your analysis.”