Won't the governing authorities just go after the security
issuers directly?
Congrats. You discovered the main purpose of decentralizing trading.
They can perform a level of filtering, of due diligence, of guidance, and of overall service that a protocol simply can't.
This is not the purpose of a decentralizing trading protocol. There will still be 3rd parties/exchanges doing due diligence. Exactly what they do now but now with the ease/speed/security of a standardized/universal protocol for recording ownership.
This is why people should be focusing on a better WoT, and better WoT integration into web-based services, etc.
I agree but we don't need a universal/standard WoT. We do not need a central point of weakness within any system.
A great example of how colored coins would benefit us investonomers would be looking at the bitfunder/btct.co situation. Had colored coins been implemented, instead of painstakingly manually reading/exporting/converting every security on the site, users could have simply set an address to receive colored coins and all shares could have been sent out in minutes with little effort.
This means that it will no longer be a huge problem when the SEC steps in and makes "owner of X exchange" halt trading/shut down.
Of course this will not solve the problem of scammers creating bitcoin securities, but that is like assuming that the purpose of bitcoin was to remove all scammers from using currencies.