On Sunday night, 60 Minutes aired an interview with Harry Markopolos: The Man Who Figured Out Madoff’s Scheme. Last month, Markopolos supplied similar information to a Congressional panel.
By its vary nature, the SEC does not stop a financial crime until happens. As with all prosecutions, the bad act needs to happen before there is a crime. The failure with Madoff is that the fraud appears to be so big and appears to have been happening for over a decade. Usually, the SEC stops fraud before it gets so big.
If you think the SEC is ineffective, take a look at the SEC litigation releases. Quickly browsing through the list, you can see that the SEC is filing to stop a few securities fraud schemes every week. Hardly ineffective.
The SEC can no sooner prevent securities fraud than the police can prevent a robbery. You hope your patrols and effective prosecutions will deter potential bad actors. But people will always be enticed to take short cuts.
Markopolos spotted the problem and the SEC blew it. Let’s move on and find out how Madoff did it so we can learn some lessons. The sound bites and preachings from Markopolos are not contributing to the prevention of future securities fraud.
Thanks to Bruce Carton and Securities Docket for pointing out the interview: Sunday Night: Harry Markopolos on 60 Minutes.