Statement by SEC Chairman:
Statement on the Release of the Executive Summary of the Inspector General's Report Regarding the Bernard Madoff Fraud
Chairman Mary L. Schapiro
U.S. Securities and Exchange Commission
September 2, 2009
Since Bernard Madoff's fraud came to light last year, the Securities and Exchange Commission's Inspector General has been investigating why the agency failed to detect it. His report makes clear that the agency missed numerous opportunities to discover the fraud. It is a failure that we continue to regret, and one that has led us to reform in many ways how we regulate markets and protect investors.
In an effort to provide a full accounting as quickly as possible, we are releasing the Executive Summary of the Inspector General's report, to be followed by the 450-page report in the coming days.
When I took office in January in the wake of the Madoff fraud, I decided that we would not simply wait for the Inspector General's report before taking action. Instead we have been reviewing our practices and procedures, addressing shortcomings, and implementing the lessons learned.
The findings contained in the report reinforce my view that the many changes we have made since January will help the agency better detect fraud.
We have streamlined our enforcement procedures and are putting more experienced staff on the frontlines. We also have bolstered our inspection program, started to revamp the way we handle hundreds of thousands of tips received annually, begun to hire new skill sets, increased internal training, and sought more resources to keep pace with financial fraudsters.
Although numbers cannot tell the entire story, already we have filed more than twice as many emergency temporary restraining orders this year related to Ponzi schemes and other frauds, as compared to the same period last year.
In addition, we have proposed new industry rules that will better protect clients of investment advisers by mandating independent reviews to assure that a client's account contains the funds that the investment adviser says it contains. And, we have sought legislation to enable us to compensate whistleblowers for providing substantial evidence of wrongdoing. [A more complete list of the reforms undertaken is available at http://www.sec.gov/spotlight/secpostmadoffreforms.htm.]
Since becoming Chairman, I have been impressed by the expertise and dedication of the men and women at the SEC and their willingness to embrace the changes that we have undertaken to better protect investors. I am confident that together we will succeed in our efforts to revitalize the agency and help bolster investor confidence.