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Sentinel and Enterprise – After Bernard Madoff’s Ponzi scheme collapsed, having bilked charities, hedge funds and retirees of as much as $65 billion, the temptation is to say: “We’ve learned our lesson. That will never happen again.”
Barring an overhaul of the Securities and Exchange Commission — with tougher regulations, more resources and aggressive, skeptical, better-trained regulators — it could happen again. And, as the markets recover, it may even be happening now.
Disturbing evidence of this came in a summary of a longer report yet to come by SEC’s Inspector General H. David Kotz on how Madoff got away with a scam for 16 years despite repeated warnings to the agency, including a complete blueprint to the scheme by a rival investor.
Caymen Net News – Local hedge fund experts have reacted favourably to last week’s proposals by the Inspector General of the US Securities and Exchange Commission (SEC) to increase fund regulation.
The SEC has proposed that regulation of hedge funds and other investment advisors should be tightened in the wake of the SEC’s failure to stop Bernard Madoff’s $65 billion Ponzi scheme.
Don Seymour, former Head of the Investment Services Division of the Cayman Islands Monetary Authority (CIMA) and Managing Director of dms Management Ltd, said:
“These are meaningful suggestions that are worth consideration. If implemented, they would both enhance protections to investors and respect the privacy of private investment funds, in stark contrast to recent disclosure proposals put forward locally by individuals that do not address systemic risks and betray the private nature of investment funds.”
Examiner.com – David Kotz, Securities and Exchange Commission Inspector General, told the U.S. House Committee on Financial Services last week he was determined to learn "the reasons for the SEC’s apparent failure to act" on repeated warnings about Bernard Madoff’s massive $50 billion Wall Street swindle.
The SEC had first been warned about Madoff in 1999 and again in greater detail in 2005 by Harry Markopolos, a Boston accountant and securities consultant. Markopolos noted several dozen "red flags" in a 19-page memorandum he prepared for the SEC that should have triggered agency interest in Madoff’s ponzi scheme.
Markopolos, a former U.S. Army Special Operations commander who led clandestine teams in Europe and Africa in the mid-1990′s, had made it easy for SEC officials by titling his 2005 report The World’s Largest Hedge Fund is a Fraud.
