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Securities Regulation

SEC Never Did ‘Thorough & Competent’ Madoff Probe, Internal Report Says

Posted Sep 2, 2009 2:59 PM CDT
By Martha Neil

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Despite at least six complaints over a period of nearly a decade that Bernard Madoff was running a Ponzi scheme under the guise of a hedge fund, the U.S. Securities and Exchange Commission never did a "thorough and competent" investigation into what turned out to be a record-breaking $65 billion fraud, according to an internal report.

However, the investigation by the agency's inspector general's office found no evidence that senior SEC officials had attempted any improper influence or interference with a probe of Madoff's investment securities company, reports Bloomberg.

As discussed in earlier ABAJournal.com posts, at least one whistle-blower says he repeatedly warned the SEC that the trading program and returns claimed by Madoff were impossible to achieve and investigators have found that Madoff's firm didn't actually execute any of the trades it claimed to have made during perhaps 13 of the 20 or so years that the Ponzi scheme reportedly was in operation.

Responding to the inspector general's report, SEC Chairman Mary Schapiro says the inadequate investigation of Madoff “is a failure that we continue to regret, and one that has led us to reform in many ways how we regulate markets and protect investors.”

As Congress reviews the report before proceeding with a planned regulatory overhaul, Bloomberg reports, the SEC is working internally to improve its inspection and enforcement practices, as well as its handling of tips about claimed wrongdoing, according to Schapiro.

Additional coverage:

Associated Press: "SEC IG: agency never did competent probe of Madoff"

New York Times: "Madoff Inquiry Was Fumbled by S.E.C., Report Says"

Wall Street Journal: ''SEC Watchdog: Despite Warnings, Madoff Eluded Thorough Probe"

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