SEC’s Overhaul to Stop Future Madoffs Faces Scrutiny

SEC’s Overhaul to Stop Future Madoffs Faces Scrutiny - 9/9/2009

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SEC’s Overhaul to Stop Future Madoffs Faces Scrutiny
David Scheer and Joshua Gallu

Bloomberg. September 9, 2009
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EXCERPT: Securities and Exchange Commission Chairman Mary Schapiro spent seven months overhauling the agency before an internal investigator blamed “systemic” failures for missing Bernard Madoff’s $65 billion fraud. Now, Congress will decide whether she’s doing enough. Schapiro shook up the enforcement and inspections units, both faulted in a 457-page report by SEC Inspector General H. David Kotz last week that said the agency never conducted a “competent” inquiry of at least six warnings about Madoff’s New York money-management firm since 1992. Tomorrow, the Senate Banking Committee holds the first of several hearings to study the findings amid an overhaul of Wall Street oversight. “Turning around the SEC is like turning around a very large crude-oil carrier,” said John Coffee, a securities law professor at Columbia University who has testified to Congress on financial regulations. “Schapiro’s done a good amount already, but there’s much more to be done.” Schapiro, 54, who became chairman seven weeks after Madoff’s Dec. 11 arrest, has replaced senior officials, repealed policies blamed for slowing investigations, ordered a new system for screening tips and sought further regulations on money managers. The agency is focused on taking further actions to correct identified deficiencies, and may consider a “fraud college” to help examiners spot future Madoffs, she said. “We will continue to closely review the full report and learn every lesson we can to help build upon the many reforms we have already put into place since January,” SEC spokesman John Nester said yesterday. Schapiro said the report’s findings “reinforce” that the changes made “will help the agency better detect fraud.” […] The SEC ratcheted up efforts to stop Ponzi schemes after Madoff’s arrest. Since January, the agency brought claims against more than 40 such alleged scams, as well as money managers who made “Ponzi-like” payments, Khuzami said in an Aug. 5 speech.

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