From Reuters, a quote from an SEC insider: "I don't think we should worry about Bernie finding out to whom we speak .... we are not telling anybody that we have found anything improper (except for his lies to us, of course)," one SEC investigator wrote in a May 16, 2006 e-mail.
I heard it was an open secret on Wall Street that Madoff was engaged in kind of illegal stuff while he was managing his fund. Every money manager was saying that it was impossible to have no draw-down month, not a single one in decades of years of trading/investing. It is beyond my comprehension that SEC didn't know, especially after the Greek guy wrote so many letters to SEC about Madoff's fishy business. I heard Madoff produced trading statement containing daily trades that were made at prices outside the price range of the day. Madoff didn't even bother to check the price range of that day and then produce a trading price within the price range.
Very disturbing. With all the complex algorithm trading and flash orders, etc... Why cant the SEC create advanced algorithms and automated systems of their own that check trades in real time?...they can also create monthly reports so they can randomly check hedge funds and investment firms trading (against their statements) The SEC is so focused on paper trails when the crooks are not even using paper.
With Maddoff, 2 "officers" SEC did a visit in 2006, got his DTCC details to try and confirm his trades and volumes, but they never got round to checking it - read this weekend FT
Inside the SEC they know Bernie is lying about his hedge fund. The SEC conceals, and sits on this knowledge. Investors trust Madoff, in part, because they know he has sat through the SEC exams. In this scenario you would have to say the SEC wasn't "worthless". The SEC was actually a negative. Their role partially enabled this fraud.
Thousands of company executives were engaged in back-dating of stock option. This is basically stealing from share holders. But SEC simply told these people to re-date their stock option. This is basically asking them to return the stolen money (on paper). If I go to a store and steal some money from the cash register, then get caught by cops, do you think the cops will simply ask me to return the stolen money to the cash register, or put me in jail? SEC chose the former. A typical example is Steve Jobs of Apple, he returned his stolen money and nothing happened.