SEC is a big failure, admits Chairman Cox

Dec. 17 (Bloomberg) -- U.S. Securities and Exchange Commission Chairman Christopher Cox said the agency failed to act for almost a decade on “credible and specific allegations” of wrongdoing by Bernard Madoff, who authorities say bilked investors of as much as $50 billion.

Allegations dating back until at least 1999 “were repeatedly brought to the attention of SEC staff, but were never recommended to the commission for action,” Cox, 56, said in a statement yesterday. He announced an internal probe to review the “deeply troubling” revelations.
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The SEC was under fire before Madoff’s fraud came to light. The collapses of investment banks Bear Stearns and Lehman this year tarnished the SEC’s reputation and lawmakers such as Dodd and Senator Charles Grassley, an Iowa Republican, have questioned its vigilance in enforcing securities laws. Cox, a Republican appointed by President George W. Bush, has said he will leave office at the end of the Bush administration. His term officially ends in June 2009.

No Inspections

SEC Inspector General H. David Kotz released reports this year critical of the agency’s conduct. He said in one that the SEC “failed to carry out its oversight” of Bear Stearns, the New York investment bank that faced collapse in March. He’s also questioned the handling of investigations by the agency’s enforcement staff.

The SEC hadn’t inspected Madoff’s investment advisory business since he registered the firm with the agency in September 2006, two people familiar with the matter said. The SEC tries to inspect advisers at least every five years and to scrutinize new firms in their first year of registration, former agency officials and securities lawyers said.

SEC examiners reviewed Madoff’s brokerage business in 2005 after an investment manager, writing to the agency, and press reports questioned the validity of his investment returns. The SEC’s enforcement division completed an investigation involving the company last year without bringing a claim.

It seems obvious that the SEC has been consistently failing for the past 10 years or so (the Bloomberg report doesn't even mention Fannie and Freddie...). Thank god Cox is leaving. But he should actually have been fired a while ago and maybe brought to justice.