It isn't as binary as you're making it. You can hire people who don't have conflicts of interest, or the perception of conflicts of interests.

You can cut it more finely but I think you still run into the same issue. The best candidates to run an agency that regulates a particular industry are going to highly overlap with the best candidates to be leaders in that industry, because they have knowledge and experience over how that industry works.

Sort of like how many top law students choose between clerking at federal court and joining big law, or do one after the other. And people who become judges often did both. If you ban people who worked in private practice from being a clerk or judge, you would have a lower quality judiciary.

Ultimately, I think you end up with the B team trying to regulate the A team.