Madoff and the SEC

Posted by: Michael Mandel on December 16

Here is a portion of a statement issued today by Securities and Exchange Commission Chairman Christopher Cox:

Since Commissioners were first informed of the Madoff investigation last week, the Commission has met multiple times on an emergency basis to seek answers to the question of how Mr. Madoff’s vast scheme remained undetected by regulators and law enforcement for so long. Our initial findings have been deeply troubling. The Commission has learned that credible and specific allegations regarding Mr. Madoff’s financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the Commission for action. I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them. Moreover, a consequence of the failure to seek a formal order of investigation from the Commission is that subpoena power was not used to obtain information, but rather the staff relied upon information voluntarily produced by Mr. Madoff and his firm.

In response, after consultation with the Commission, I have directed a full and immediate review of the past allegations regarding Mr. Madoff and his firm and the reasons they were not found credible, to be led by the SEC’s Inspector General. The review will also cover the internal policies at the SEC governing when allegations such as those in this case should be raised to the Commission level, whether those policies were followed, and whether improvements to those policies are necessary. The investigation should also include all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm.

This is going to be a heck of a train wreck.

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Reader Comments

LAO

December 17, 2008 01:14 PM

This is just wierd -- there are parts of the Commission that are not the Commission? A lot of time will probably be wasted listening to the staff saying they just don't have time to look into everything.

conryw

December 17, 2008 02:13 PM

Hmmmm... Bernie Madoff with a lot of money.

(Sorry, I couldn't resist.)

Lord

December 23, 2008 03:09 PM

SEC to investors: "What is it about unregulated you don't understand?"

Thank you for your interest. This blog is no longer active.

 

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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