The Madoff Investment Scandal

In: Business and Management

Submitted By jymate99
Words 390
Pages 2
The Madoff investment scandal broke in December2008. Which consider to be the largest financial fraud in U.S. history. Former NASDAQ Chairman Bernard Madoff admitted that the wealth management arm of his business was an elaborate Ponzi scheme. SEC had previously conducted investigations into Madoff's business practices, but drops the ball to uncover the massive fraud. Investors question SEC that over 20 years of periodic investigation, tip received from outsider, SEC fail to recognize the red flag and detect the fraud.
I believe there are too many firms to watch and SEC fail to catch fraud has direct relationship with SEC understaff. The SEC is responsible for overseeing registered broker-dealers, transfer agents, clearing agencies, investment companies and investment advisers. A paper written by Bill Tarrant, he says that “the weakness in the SEC’s existing examination approach can be best highlighted by the fact that, in the last 16 years, while Madoff’s firm was investigated 8 times, no fraudulent activities were ever uncovered”
Some news reports have suggested that a marriage between a Madoff relative and a former SEC official may have been a factor in the SEC’s failure to investigate red flags and complaints lodged against Madoff. Bernard Madoff Investment Securities was essentially a family operated business. His brother Peter Madoff was the chief compliance officer. His son Andy Madoff was the director of trading, and his son Mark Madoff was the director of proprietary trading. Shana Madoff, his niece, was the firm's compliance attorney.
“The central flaw at the SEC is that its current oversight approach is not sufficiently risk focused”, state by Bill Tarrant. In my opinion, the underfund situation is not going to change in short-term period, SEC still going to under-staff to investigate all suspicious firms. In order to overcome that flaw, SEC should…...

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