Inspector General Report Critical of SEC Enforcement, Recommends Sweeping Changes
Two reports issued by the SEC's independent inspector general recommends sweeping changes to the agency's investigation and enforcement programs following failures to detect fraudulent activity, including Bernard Madoff's ponzi scheme, according to a New York Times report.
The two reports issued by SEC inspector general H. David Kotz recommend a total of 58 changes in the way the agency evaluates tips, trains investigators and documents examinations. The set of recommended changes include incorporation of basic investigative techniques, such as recording witness interviews and using a database for tips and complaints. The SEC should also "require tips and complaints to be reviewed by at least two individuals experienced in the subject matter prior to deciding not to take further action," the report recommends. (Read the Inspector General's Report)
The S.E.C. has accepted the recommendations, according the the New York Times article.
The proposed changes follow the IG's publication of its investigative report regarding the SEC’s failure to detect the Madoff ponzi scheme. That investigation found that the SEC had failed to properly examine Madoff’s firm and had not adequately followed up on whistleblower tips from as far back as 1992 that could have lead to discovery of the estimated $65 billion fraud scheme.
