Warning investors

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in investment firms, but have

no business grading securities.

If there is a silver lining in the Carolina Investors bankruptcy that has likely sapped $275 million from mostly Upstate clients, it's that the Legislature is finally taking state-level securities enforcement seriously. But lawmakers must tread carefully.

Some members of the General Assembly, according to The (Columbia) State, want the state's Securities Division to begin warning investors about potentially bad investments. That would turn government employees into financial analysts, a job that should be left to the private sector. There should remain a clear, bright line between what government does in securities enforcement and what the private sector does in rating securities and offering investment advice.

State government should continue to seek out fraud and ensure that companies are being truthful and forthright about the fiscal health of their corporations and the risk investors assume when buying their securities. But rating stocks or other investments as "good" or "bad" buys should remain the sole responsibility of the private sector. Nowhere does government — not in any state nor on the federal level — tell investors whether to buy, sell or hold.

As this newspaper has reported since Carolina Investors filed for bankruptcy in April, regulators knew Carolina Investors' parent company, Columbia-based HomeGold, was in trouble.

The Securities Division, which operates under the Attorney General's Office, had written HomeGold as far back as 1999 to inquire about some of its quarterly losses that fit into a pattern of big losses for the company. The office's responsibility is to ensure that HomeGold's tenuous financial picture was reflected in the information it relayed to investors. The state's obligation was to ensure that the risk Carolina Investors and HomeGold relayed to investors matched the obvious risk of loss that its corporate earnings sheet revealed at the time.

A state grand jury is meeting now, and among the questions being explored is whether investors were misled about their risk of loss in the wake of HomeGold's substantial losses.

There are 8,000 investors here in the Upstate who understandably would have liked for the state to have been louder and more public with its concern over the financial state of HomeGold.

But the state's responsibility is not to make sure investors don't lose money. The state's obligation is to make sure investors don't get cheated.

Ultimately, individual investors, with the help of financial professionals, are responsible for determining how much risk they can assume and how healthy a potential investment might be.