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Why Didn't the SEC Catch Madoff? It Might Have Been Policy Not To
So, essentially the management of all the money under 401ks, IRAs, and I assume pensions, has been legally unsupervised.
There are four main laws that the SEC uses to regulate the financial sector. At least as far as numbers go, the agency has a fairly extensive record of enforcement actions with the first two, which are aimed at the securities markets.
The first of those is the Securities Act of 1933, also commonly known as the "Blue Sky laws," which among other things set down the rules mandating public disclosure of pertinent information to investors in securities. The second is the Securities Exchange Act of 1934, which governs securities already issued, and includes the laws barring insider trading. Both of these laws are primarily intended to prevent fraud in the securities markets.
But the agency's record is a little spottier when it comes to the other two key pieces of legislation, the Investment Advisers Act of 1940 and theInvestment Company Act of 1940. These are the agency's main tools for prosecuting fraud and malfeasance involving people who manage other people's money – mutual funds, hedge funds, investment managers. Somebody like Bernie Madoff, who took billions from investors and simply stole the money instead of investing, would largely be regulated under the latter two acts.
Kathleen Furey joined the SEC in September of 2004, starting as a law clerk in the Enforcement Division. She steadily rose within the agency and was promoted three times over the next three years.
Then in 2007, Furey started work on a case that involved Value Line, a high-profile family of mutual funds that was being accused of charging tens of millions of dollars in bogus commissions. The company had appeared on the SEC's radar via a referral in 2004, but the agency's higher-ups had not yet approved a formal investigation, which is necessary for the issuance of subpoenas.
When she tried to take that next step in the Value Line case, Furey says she was denied. This is when she says Stepaniuk filled her in on his "We don't do IM cases" policy. Upset, and convinced that the Assistant Director of the New York office did not have the authority to unilaterally non-enforce two major portions of the SEC's regulatory mandate, Furey appealed to Stepaniuk's superior in the NYRO.
http://www.rollingstone.com/politics/blogs/taibblog/why-didnt-the-sec-catch-madoff-it-might-have-been-policy-not-to-20130531
The first of those is the Securities Act of 1933, also commonly known as the "Blue Sky laws," which among other things set down the rules mandating public disclosure of pertinent information to investors in securities. The second is the Securities Exchange Act of 1934, which governs securities already issued, and includes the laws barring insider trading. Both of these laws are primarily intended to prevent fraud in the securities markets.
But the agency's record is a little spottier when it comes to the other two key pieces of legislation, the Investment Advisers Act of 1940 and theInvestment Company Act of 1940. These are the agency's main tools for prosecuting fraud and malfeasance involving people who manage other people's money – mutual funds, hedge funds, investment managers. Somebody like Bernie Madoff, who took billions from investors and simply stole the money instead of investing, would largely be regulated under the latter two acts.
Kathleen Furey joined the SEC in September of 2004, starting as a law clerk in the Enforcement Division. She steadily rose within the agency and was promoted three times over the next three years.
Then in 2007, Furey started work on a case that involved Value Line, a high-profile family of mutual funds that was being accused of charging tens of millions of dollars in bogus commissions. The company had appeared on the SEC's radar via a referral in 2004, but the agency's higher-ups had not yet approved a formal investigation, which is necessary for the issuance of subpoenas.
When she tried to take that next step in the Value Line case, Furey says she was denied. This is when she says Stepaniuk filled her in on his "We don't do IM cases" policy. Upset, and convinced that the Assistant Director of the New York office did not have the authority to unilaterally non-enforce two major portions of the SEC's regulatory mandate, Furey appealed to Stepaniuk's superior in the NYRO.
http://www.rollingstone.com/politics/blogs/taibblog/why-didnt-the-sec-catch-madoff-it-might-have-been-policy-not-to-20130531
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