Saturday, November 12, 2011

SEC fails to sack any staff over Madoff

A Telegraph article discussed how the SEC failed to sack any staff who were responsible for uncovering the ponzi scheme run by Bernie Madoff.

This brings up an interesting question.  Were any financial regulators sacked for their failure to prevent the financial crisis that began on August 9, 2007?

This is an important question given that the number one responsibility of the global financial regulatory establishment was preventing just such an event from happening.
The lack of strong action against any employee at the SEC has upset victims of the scandal. 
"They should have fired them and made whole the people who got victimised, but this is all wishful thinking," said Elisa Entine, who lost $1m from the scandal. 
A 2009 report by the SEC's internal watchdog called into question the conduct of 21 staff members for work related to Madoff. 
David Kotz, who wrote the report, had urged the SEC to act on an “employee-by-employee basis” to prevent a recurrence of mistakes that kept the agency from halting the fraud. 
However, most staff found culpable were merely docked a week's wages or given "counselling memos". The strongest action taken against any employee was a 30-day suspension without pay, after it was determined that if they were fired it would hurt the agency's operations, according to John Nester, an SEC spokesman....
This treatment of its staff parallels very strongly how the SEC has treated Wall Street firms -- see settlements over CDOs like Abacus with Goldman and Citigroup.
Bernard Madoff cheated more than 16,000 investors out of about $13bn in declared losses, with some estimates putting the total at $65bn. 
He was arrested in December 2008 and pleaded guilty three months later to running the largest pyramid-style scam in history, receiving a 150-year jail sentence.

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