“I think the SEC’s going about preventing the next bogus thousand-point drop all wrong,” Cramer said Tuesday.

Instead of working with the exchanges to develop a coordinated response to some similar future decline – probably through a circuit breaker “that won’t amount to a hill of beans to protect you,” Cramer said – the SEC should focus on protecting individual investors.

See, Cramer doesn’t think the exchanges can solve this problem because their whole bias is to allow the big institutional hedge funds and high-frequency traders to push through tons of transactions that generate at most a fraction of a penny in profits. Is that what investing is supposed to be about?

Cramer doesn’t think so, which is why he called for a return to the principle that guided former SEC Chairman Arthur Levitt, who served between 1993 and 2001: Protect the little guy. That should be the focus right now.

Cramer thinks this lack of an adequate response by regulators is scaring retail investors out of the market, and he can’t blame them for having that view. Because until the SEC focused on protecting those who need it the most, he said, “The whole reform effort will be deeply flawed” – circuit breaker or not.

So, “The SEC should do its darned job,” Cramer said, “and make this market safe for you, the regular investor, once again.”

Call Cramer: 1-800-743-CNBC

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